Crisis may set back poorest: World Bank panel

By Lesley Wroughton

WASHINGTON (Reuters) - World finance and development ministers warned on Sunday that developing countries risked serious and lasting setbacks from the global financial crisis and urged major economies to deliver on aid pledges.

"This is a man-made catastrophe," World Bank President Robert Zoellick told a news conference after a development committee meeting of IMF and World Bank member countries.

"The actions and responses to overcome it lie in all our hands," Zoellick added.

World finance leaders on Sunday endorsed an action plan by major economies to chart a course out of the crisis, which began in the U.S. housing market and soon spread to Europe, triggering the most severe downturn in years.

In a communique, the development committee called on the World Bank and its sister organization, the International Monetary Fund, to draw on the full range of their resources to help countries that may encounter problems, not only from the credit crisis, but also from high food and fuel prices.

"The poorest and most vulnerable groups risk the most serious -- and in some cases permanent -- damage," the development committee communique said.

The World Bank said it has the capacity to "comfortably double" lending to developing countries in need. IMF Managing Director Dominique Strauss-Kahn repeated that the Fund stood ready to respond with a $200 billion war chest.

Ministers also urged the World Bank to explore all options to help recapitalize banks in developing countries affected by the global liquidity crunch.

The bank's private-sector lender, the International Finance Corp, said on Saturday it planned a $3 billion fund to help small banks hit by the financial crisis.

BROKEN AID PROMISES

But ministers said big donor nations should not use the turmoil in markets as an excuse to pull back on aid promises to the poor.

African finance leaders pointed to the speed with which the U.S. and Europe have raised billions of dollars for faltering banks but are behind in aid commitments to poor countries.

Higher food and fuel prices have added to the budget squeeze of poor countries. The World Bank has a watch list of 28 countries facing financial strains which spans from Jordan, Lebanon, Cambodia, Sri Lanka to Jamaica, Haiti, Ethiopia, Rwanda, Malawi, Nepal, Fiji and Ivory Coast.

"We must ensure that as governments and the public turn their attention close to home, they do not step back from their commitments to boost assistance," Zoellick said. "Aid flows must be maintained (and) today's meeting of ministers was unanimous in that regard," he added.

European Union aid officials also worry.