United Nations Radio

Developing world countries hold little responsibility for the current global economic crisis, yet they are among the hardest hit by it.

Pastry vendor and her child

And the worst may be yet to come. UN Radio's Nick Baker reports.

NARR: A report by the World Bank published this week found that developing counties will see nearly $1 trillion less in foreign investment in 2009 than they did two years ago.

This plunge in economic activity is expected to send many developing countries spiraling into dangerous levels of negative growth and debt.

Martin Khor, Director of the South Centre, an intergovernmental organization of developing countries, said that this finding showed that the economic crisis was turning into an economic catastrophe for the developing world.

KHOR: "We are expecting, if things don't improve, a new debt crisis for at least 40 developing countries and that would be a real disaster for them because many of these countries have just begun to get out of the debt trap and they were beginning to grow quite well, 6-8%, and now they are back in this situation, in a crisis that they did not create. I don't think anyone can blame the developing countries for this crisis."

NARR: Mr Khor said that spiraling levels of debt would have severe social repercussions in the developing world.

KHOR: "Exports are reduced, the remittances of the migrant workers is reduced, tourism is reduced, new funds coming in are reduced, so their foreign reserves may drop to a level where they cannot fund imports and they can't fund debt servicing, now if you have that kind of a situation then the country may not have the money to import necessities, like food for example, many countries are very dependent on food. The governments will have reduced earnings and they can't do what they should be doing for schooling, for welfare and so on. So the Millennium Development Goals will be threatened, you will see an increase in poverty which is already being predicted, more jobs are lost as the ILO has told us, so it's a development catastrophe."

NARR: He said that the obligation of developed world countries was controversial but clear.

KHOR: "It's to facilitate the injection of huge liquidity into developing countries that need it, as the developed world has done to their own companies and so on. They have the money. So you're rescuing banks, insurance companies, motor car companies and so on. The developing countries need the same, they need to have a stimulus. So what we are proposing is that developed countries transfer part of their money to developing countries."

Nick Baker for United Nations Radio.

(duration: 2'38")