BRUSSELS, 3 September 2009 The President of the African Development Bank Group Donald Kaberuka said that the international response to the global crisis and the reform of the global financial aid architecture has failed to take into consideration the issues facing least developed countries.
“People here call it a financial crisis but in Africa it is a social and an economic crisis,” he told the Committee on Development at the European Parliament in Brussels. Indeed, even the International Monetary Fund (IMF), the World Bank, and UN have called it a development emergency – language not typically used.
Low-income countries were sidelined in the initial response because it was thought they would not be affected – a predication the IMF had reportedly made in September of last year.
Kaberuka said the upcoming G20 summit in Pittsburgh needs to be global in reach and make sincere efforts to meet Official Development Assistant (ODA) commitments for low-income countries. “The G20 summit must go beyond statements and principals,” he said. “Africa has 1 billion people and the human concerns must be addressed.”
Another pressing issue is that emergency aid given to some countries is taken from pre-established future budgets. This process is known as frontloading so that money initially allocated for future funds is distributed leaving a gap.
“Frontloading is starving the budget down the road,” said Professor Ngaire Woods of Oxford University. Woods, who also attended the Committee on Development alongside Kaberuka, warned that frontloading only provides short-term solutions and that the most vulnerable countries are denied funds because of a World Bank lending formula that rates countries on performance.
“Money is pre-allocated to some countries leaving those hardest hit not eligible,” said Woods.
While the G20 response has been swift, coordinated and full of promises, the details are revealing some disturbing tendencies. The IMF is currently reporting record-lending levels with fewer conditions but so far only 1.6% of it has gone to sub-Saharan countries. The vast majority of the loans have instead been slated for high income and emerging countries in the EU area like Iceland, Latvia, Romania and the Ukraine.
In January, the President of the World Bank, Robert Zoellick, had called for each developed country to pledge 0.7 % of its stimulus package to a vulnerability fund to assist developing countries that can’t afford bailouts and deficits. So far no developed country has given into this fund added Woods.
