G20 leaders pledge $1 trillion for world economy Special

World leaders at the G20 summit have pledged $1 trillion in funds to the International Monetary Fund and other institutions to tackle the economic crisis.

But narrowing the gap between the developing nations and the developed world is a concern that is imperative to creating long term solutions. Research Fellow at the prestigious Overseas Development Institute in London, Dr Dirk Willem Te Velde, in an interview with this reporter said the UK had taken the step of increasing aid to 0.7 percent of GDP. The unprecedented $300 million package in global funds for multi-development banks (MDBs) announced at the summit would be more effective in the form of grants rather than loans, he stated. “I have been impressed in parts with the communiqué, but 17 of 20 countries of the G-20 have engaged in protectionist measures, so that is a problem,” Dr Te Velde said in an interview with DigitalJournal.com. His thoughts were echoed by World Bank President, Robert Zoellick who pointed out earlier that poorer countries need stable and open export markets. Protectionist measures would only hinder any good the summit is trying to achieve. To soften the fallout from the economic crisis for poorer nations, Dr Te Velde suggested “better financial rules that avoid boom and bust, better macro economic management, funds (fiscal and financial) to developing countries to cushion the impact,” would be sound steps to take. Meanwhile, according to a communiqué released by the G20 leaders, “the actions and decisions we have taken today will provide $50 billion to support social protection, boost trade and safeguard development in low income countries, as part of the significant increase in crisis support for these and other developing countries and emerging markets”. Developing countries are set to lose incomes of up to $750 billion by the end of this year, according to a background paper published by the ODI. Rising unemployment, hunger and poverty seems to be the fate of more than 50 million people. Helping poor countries to ride the global economic recession requires a concerted effort on the part of the developed world. At least $50 billion would be needed in Africa, according to researchers at the institute. Ahead of the meeting, UN Secretary General, Ban ki-Moon had urged G20 leaders to consider the seriousness of the challenges faced because of the economic crisis. “Unless urgent and decisive action is taken to buffer the blows of the global downturn on the most vulnerable, the economic crisis may soon be compounded by an equally severe crisis of global instability,” he said. As a result of the summit, observers are predicting that banking is an arena which will see a lot of changes. Dr Te Velde pointed out, “We will enter a more cautious world, with deleveraging, and more regulations. So a period of slower growth. But there are also opportunities to reform and improve economic policies and speed up growth enhancing policies.”