June 3, 1999
In its first detailed look at the impact of the Asian financial crisis on global poverty, the World Bank estimates the world has 200 million ''newly poor'' and recommends urgent changes in financial rescue programmes to protect people, not just economies. ''Countries that until recently believed they were turning the tide in the fight against poverty are witnessing its reemergence,'' said bank President James D. Wolfensohn. ''We must now draw on the lessons of recent experience to help us reshape our strategies for the future.'' Programmes to avoid and deal with financial crises in all countries must now boost social protections, often called ''safety nets,'' the bank said. They include unemployment insurance, subsidised school fees, job creation, food subsides and other programs directly affecting the poor.
The bank is responding to data showing poverty rising again in India, continuing to go up in Africa and sharply worsening across eastern Europe and central Asia. Indonesia, hit early in the crisis, is among the worst off, with 30 million more people earning less than HK$8 a day than it had before the financial collapse. Worldwide, the number of people below that income, considered the benchmark for abject poverty, is estimated at 1.5 billion - up 200 million from 1993. Final figures for 1999 will not be available for several years, but the estimate is based on trends since 1.2 billion poor were counted in 1987.
Despite the gloomy outlook, the report said there has been widespread progress in health and education. And an exception to the increase is China, where the number of poor is believed to have declined from 280 million in 1990 to 125 million in 1997.
The bank, in a report last week based on a survey of Asian companies, concluded that Asian economies are recovering more quickly than expected from the Asian crisis. The new report points to the lasting impact of the crisis on some of the world's poorest, diminishing hope of cutting worldwide poverty in half by 2020 - a goal many experts had thought could be achieved. ''The East Asia crisis and its spillover into other emerging markets offers the world an opportunity to devise a new approach to crisis, one that rightly puts concern for the poor and the vulnerable right at the centre of its response,'' said World Bank economist Giovanna Prennushi, who wrote the report. ''By helping countries establish stronger social protections, the international community may be able to prevent the sudden impoverishment of millions of people when crisis strikes.''
The bank has distributed to world policymakers a working paper that lays out plans for safeguarding the needy before and during financial crises. The paper gauges the impact of recent developments on the poor in East Asia, Latin America and Africa. Wage cuts, job reductions, lower rates of return on savings, reduced government benefits and drops in services such as health care and safety can all affect people directly and immediately, the paper says, recommending guidelines for programs that head off such problems. A ''pro-poor response'' to all crises could add up to 5 per cent to governments costs, but could be cheaper, in the long run, than hastily prepared relief operations that have no lasting impact, it says.
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