The Courier

Food and Agriculture Organisation Director-General, Jacques Diouf.

© Reporters/AP

The effects of the global financial crisis on developing countries are becoming clearer. In its communication, “Helping developing countries to overcome the crisis”, published last April and endorsed by the EU Council of Ministers and the EU-ACP Joint Council in May, the European Commission forecast that foreign investments could fall by 80 per cent and emigrants’ remittances by 40 per cent. World commerce is slowing down and the economic growth of these countries could fall by 5 per cent or more. This situation, says the Commission, will plunge a further 100 million people into poverty in 2009, and these people will join those already affected by the explosion of food and fuel prices. It is also clear that developing countries will be the worst affected by the global recession, even though they bear the least responsibility for it, just like climate change, the Commission reports. In Africa, economic growth could reach 3.4 per cent in 2009, against 5.2 per cent in 2008, or even a loss that would represent almost double the Official Development Assistance (ODA) to the continent.

Accelerating and enlarging flows of aid

 “We must take action immediately and the aid must have a direct effect”, underlines the Commission. How? Principally by accelerating the payment of aid, as well as by regrouping it and redefining priorities. If need be, the Commission aims to redefine its support programmes to reflect the new needs and emerging priorities. The European Investment Bank should concentrate on anticyclic actions in priority areas, encompassing infrastructure, energy, the climate and the financial sector. The revitalisation of agriculture in developing countries, particularly ACP countries, also figures on the list of priorities of the Commission. This includes the implementation of the €1bn ‘food facility’  , €314M of which has already been paid out in favour of the 23 countries (http://ec.europa.eu/europeaid/what/food-security/food-facility_en.htm) considered as being most under threat. The Commission also set itself a new objective: investing in “farming corridors” that would ensure relations between markets and production areas. On the climate issue the Commission also offers new financing to help reforestation and to transfer the technologies of developing countries. Funds for this would be taken from the profits of an auction sale of the emission quotas of EU countries.

On the commercial front, the Commission proposes to reinforce export credits, credit facilities and guarantees, “determining modes of commerce stimulation”.

A mechanism to finance social services

This year, the economic crisis could plunge 100 million more people into poverty in developing countries, underlines the Commission. Women, children, the elderly and those with disabilities make up the groups most at risk. The Commission feels that, to guarantee this very vulnerable group some protection, it is vital to ensure a continuous flow of aid in the key areas of health, education and decent work. The EC underlines that the social crisis has an economic cost that could damage the public financing of social services. Therefore, the EC has offered to put in place a support mechanism for social spending and to devote €500M of the European Development Fund (EDF) to the ACP countries most affected by the crisis. This financing will be implemented through the existing Flex system (a form of ‘rapid payment’ to help ACP countries come to terms with the fluctuations of export proceeds) and based on former losses of export proceeds, and by a new ad-hoc Flex system – which must still be formerly proposed – based on vulnerability. This ‘vulnerability Flex’ will be based on such parameters as the forecast of export losses, financial flows and the decline of transfers.

On this last point, the EU ministers of foreign affairs, who met in Brussels on 18 May, are said to be particularly concerned by the negative impact of the crisis on emigrants’ remittances to their home countries. This is because these funds, according to some estimates, far exceed the aid of industrialised countries. Thus, the ministers “are very pleased at the work that is currently being conducted in international circles (…) particularly in view of the development of an institute for the African emigrants’ remittances”.