World Bank: Developing Nations May Face Tough Times

WASHINGTON, Oct. 9, 2008 -- With world attention trained on resolving a financial crisis in Western economies, World Bank President Robert Zoellick said the poverty-fighting institution is warning developing countries to prepare for tougher times.

In an interview with Reuters ahead of weekend meetings of world finance ministers, Zoellick said business failures, bank emergencies and balance of payments crises are all possible in developing countries as the crisis spreads.

He said a growing financial squeeze, together with higher food and fuel prices, will only make it more difficult for governments in developing countries to protect the poor.

A new World Bank report prepared for the meetings warns that high food and fuel prices will increase the number of malnourished people around the world in 2008 by 44 million to over 960 million.

The World Bank chief said the bank had identified around 28 countries that could face fiscal difficulties. He said he would release the details later on Thursday ahead of weekend meetings of finance leaders in Washington.

"What we're now moving into is the phase where one has to look more broadly at the danger of developing country growth and there it depends on policies they take and the support we and others can give them," Zoellick told Reuters.

"Over the medium and long term, I remain optimistic about the possibilities of sub-Saharan Africa being a pole of growth, but it won't happen automatically, it will require their actions and the right investments," he added.

Zoellick said the World Bank was working with developing countries to make them aware of the services the bank could provide to help prepare contingency plans and support countries whose banking systems may come under strain.

STAKES ARE HIGH

The financial crisis threatens to undo much, or in some cases all, of the progress made in many developing countries over the past several years to lift growth and reduce poverty and disease.

Between 1997 and 2007, 17 countries in Sub-Saharan Africa grew on average 6 percent, most of them non-oil producers. Another 8 countries, all oil producers, grew on average 8 percent over the same 10 years.