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'Poor countries face serious damage'

business Updated: Oct 13, 2008 10:46 IST
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Developing countries could face the most serious damage from a prolonged global credit crisis as they have fewer resources to prevent their own banks from collapsing, the World Bank and International Monetary Fund (IMF) warned on Sunday.

The IMF and World Bank promised to use their "full range of resources" to help countries that cannot manage the spreading financial crisis on their own. Countries promised to maintain aid pledges to poor countries despite the turmoil in their own backyards.

Some 30 countries face serious budget shortfalls as exports have dropped and money inflow from foreign investors has slowed. The IMF on Thursday boosted its own lending facilities for struggling countries.

Developing countries already hit by surging food and fuel prices "risk very serious setbacks to their efforts to improve the lives of their populations from any prolonged tightening of credit or sustained global slowdown," World Bank President Robert Zoellick said.

"The poorest and most vulnerable groups risk the most serious - and in some cases permanent - damage."

Members of the Development Committee of the IMF and World Bank urged more contributions to a fund to help offset the food crisis. Pledges of some $1.2 billion have been made to date, including $50 million offered this week by Australia.

The World Bank is launching a new "energy for the poor" fund, as well as two climate funds to deal with other ongoing problems faced by poorer countries.

"The financial crisis adds a crisis to a crisis" for the developing world, said IMF Managing Director Dominique Strauss-Kahn, who noted that the "other crises" will stay around as the financial turmoil eases.