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The financial crisis of September–October 2008 is major and ongoing, beginning with failures of large financial institutions in the United States; into European bank failures; declines in various stock indexes and a substantial credit crisis leading to the bankruptcy of large and well established investment banks, as well as commercial banks in various nations around the world. High oil prices; high food prices; global inflation; increased unemployment; and the possibility of a global recession, all hold threats on the poor and developing countries.

 

The executive heads of UN specialized agencies, funds, programs, and the World Bank and the International Monetary Fund met on 25 October 08  to “undertake a wide ranging assessment of the ongoing global crisis in financial markets and the threat of recession in the global economy that holds serious risks for people, families and communities everywhere" the world body said in a statement issued at the end of a meeting of the UN System Chief Executives Board for Coordination (CEB).

 

Experts expect that the crisis will result in increased poverty and inequality. Liliana Rojas-Suarez, Centre for Global Development, suggests that impacts will be felt in two channels. First, lower growth in the industrial countries will mean less demand for developing countries' exports, both manufactured goods and most commodities. The second channel will be a reduction in capital inflows to developing countries. Because the U.S. crisis has created a global credit crunch, investors are becoming more risk averse and thus less willing to invest in developing countries. As uncertainty and risk have increased in international capital markets, investors will continue to shift the composition of their portfolios, away from riskier assets, such as emerging markets securities. he combination of less export demand and perceived higher-risk for investors means that developing country governments and businesses needing access to capital will face higher interest rates, both externally and locally. Higher interest rates and less willingness to lend make it harder for middle class and poor people to borrow. Moreover, developing countries will need to cut fiscal expenditures to deal with reduced sources of revenue and finance. History shows that when fiscal expenditures are cut, social programs and infrastructure projects that help the poor are especially vulnerable to being curtailed.

 

 

Read more about the financial crisis and its implications:

 

In-Depth on the Global Financial Crisis from the Financial Times

 

 

UN pledges effort to help poorest amid global financial crisis

 

 

 

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