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Coping with the Global Crisis

Mar 25, 2009, 8:16 AM

In a World Bank Paper for the G20 finance ministers and Central Bank Governors meeting held recently in the United Kingdom 13-14 March, 2009, we are given an unfavorable but realistic picture of the impact of the global crisis on poor and developing countries. However, indicators are also in place for ways of surviving the crisis and pursuing development.

On the assessment of the impact of the crisis on the poor and most vulnerable of the world, it is discerned that the economic crisis is projected to increase poverty beyond 46 million people in 2009. It is projected also that the principal transmission channels will be through employment and effects of wages as well as declining remittance flows. According to World Bank sources, employment and wages will shrink and will unfavorably affect immigrant and other remittances to poorer countries. According to the Bank's report, estimates from the Ministry of labor of China show 20 million out of work, the most affected sectors being export trade, construction, mining and manufacturing. In Cambodia, the garment industry has laid off at least 30,000 workers, which represents a good 30% of the workforce. In India, over 500,000 jobs have been lost over the last 3 months of 2008 in export-oriented sectors such as gems and jewelry, autos and textiles.

The report also shows that third world workers are increasingly shifting out of dynamic export-oriented sectors into lower productivity activities and moving from urban back to rural areas. The assessment is that these trends are likely to jeopardize recent gains in GDP and national growth, and poverty reduction as a result of labor shifting to higher return activities.

Furthermore, a major decline in remittance and opportunities for migration, are also undermining poverty gains and bringing down wages to insignificant, unattractive levels. Falling employment and wages in turn prevent households from providing adequately for food and basic necessities. The Report concludes that the declining growth combined with high levels of initial poverty have left many households in developing countries highly exposed to the crisis. In this connection, the Bank estimates that of 116 developing countries, 94 have already experienced decelerating growth, of which 43 experience high levels of poverty.

The situation therefore demands re-arrangement of spending needs and public spending.

Among the West African countries affected, the Gambia ranks among the HIGH EXPOSURE Countries along with Burkina Faso, Ghana, Mali, Mauritania, Niger, Nigeria, Sierra Leone, and Togo. Ranked in HIGH POVERTY Category countries are Benin, Guinea, Guinea Bissau, Ivory Coast, and Liberia.

Senegal is ranked with some of the major developing countries of Europe, Asia, and Latin America as countries experiencing only DECELARATING GROWTH.

The major weapon against the crisis for many African countries is control and prioritizing of public spending. The Gambia is no exception and stringent measures should be taken to prudently manage public expenditure and use of public funds.

"It's a recession when your neighbour loses his job; it's a depression when you lose your own."

Harry S Truman