Global ministers warn of risk of rising poverty

WASHINGTON (Reuters) - Global finance and aid ministers on Sunday called on rich donor nations to deliver aid to poor countries, warning that world poverty will rise sharply as more nations fall victim to the financial crisis.

The ministers from the 185 member countries of the World Bank and International Monetary Fund also said it may be necessary to raise more resources for the World Bank if the global crisis drags on.

"We urged donors to accelerate delivery of commitments to increase aid, and for us all to consider going beyond existing commitments," they said in a communique after a meeting here.

The ministers warned that the credit crisis, the worst since the Great Depression, risked derailing universally agreed U.N. targets to overcome poverty by 2015.

World Bank President Robert Zoellick said most of the U.N. Millennium Development Goals on poverty, hunger, education, equality, disease and infant mortality are unlikely to be met.

"We must continue to act in real time to prevent a human catastrophe," he said at a closing news conference.

Zoellick said the World Bank was well-capitalized and that the ministers had endorsed its plan to increase lending to middle-income countries by up to $100 billion over three years.

The ministers also called on the Bank to assess whether it has enough resources to aid the poorest nations, and asked it to report back by October.

VICTIMS OF CRISIS

Developing countries, initially shielded from the direct impact, are now being hurt by the financial crisis, which is coming on the heels of a damaging upward spiral of food and fuel costs.

An outbreak of a new flu virus that has killed at least 81 people in Mexico and infected 20 in the United States was talked about in corridors and could dent hopes for a global recovery. But it was not raised by ministers in the official session.

The World Health Organization warned on Saturday that the swine flu has the potential to cause a global pandemic.

Asked by Reuters whether the outbreak would impact the global economy, European Central Bank Governing Council member Ewald Nowotny said: "I don't think so but I don't have enough factual information to give a qualified answer to that."

Mexican Finance Minister Agustin Carstens said the outbreak could have a big impact on Mexico's economy, but he said it was too soon to say how significant the impact might be.

FUNDING DEVELOPMENT BANKS

The focus of the official session remained on protecting the developing world from the virulent financial crisis.

"The international community needs to work together to prevent the current crisis from escalating into a development crisis," China's Deputy Finance Minister Li Yong said.

Ahead of the weekend meetings, the World Bank estimated developing nations faced a financing gap of between $270 billion to $700 billion, and it called on rich donors not to forget promises made in 2005 to increase aid to the poorest.

Venezuelan Planning and Development Minister Jorge Giordani said developing countries worried that the lending capacity of the World Bank could be compromised if the global crisis turns out to be deeper and longer than expected.

The World Bank said economic growth in low- and middle-income countries will slow sharply this year to 2.1 percent from 5.8 percent as a deep recession in the advanced economies hits exports.

"This sharp slowdown is likely to seriously set back progress on poverty reduction," the Bank said.

Food and fuel price increases between 2005 and 2008 pushed between 160 million and 200 million more people into extreme poverty, and about half of them will remain poor in 2009 even as prices recede from their peaks, it added.

Recent World Bank analysis also suggests that the current crisis will result in 53 million more people living in extreme poverty in 2009, or 65 million more if a $2 a day measure is used. It said 200,000-400,000 more infants will die each year.

"These numbers will rise if the crisis deepens and growth in developing countries falters further," it added.

(Additional reporting by Anna Willard; Editing by Tim Ahmann)