Financial Crisis Will Hit the World's Poorest Hard

Make the Most of Your Money by Investing in People

The current financial climate is extremely challenging for all, but its impact on the developing world, including on our partners in Africa, South Asia and Latin America, will be even greater. The Hunger Project intervenes at the point of highest leverage: by building the capacity of the people who are experiencing the adverse effects of this crisis, whose lives have already been made hard from poverty and hunger.

Crisis after Crisis

The current financial crisis comes on the heels of a major worldwide food price crisis, which pushed millions of people deeper into hunger and poverty. According to the World Bank, the food crisis set back progress on meeting the poverty Millennium Development Goal by seven years (World Bank 2008).

Although food prices have moderated, the problems stemming from that crisis are more persistent. Many parents sacrificed education and health care for their children so they could afford to feed their families. The poorest families, for whom food was already scarce, were forced to cut back on or buy lower quality food. It is estimated this contributed to an increase in the number of children suffering permanent damage from malnutrition by 44 million (World Bank 2008).


Still reeling from the food crisis, developing countries are beginning to feel the effects of the financial crisis. Now, when they are most needed, resources are dwindling.

Less Aid

Aid to developing countries, which has been declining for two decades, is now at even greater risk. It is widely speculated that, despite recent commitments to improve and scale up official development assistance, curtailment of aid is likely as donor countries experience reversals in their own economic fortunes (World Bank 2008).

Fewer Remittances

Remittances, money that migrant workers send home to their families, constitute one of the main sources of capital to developing countries, often exceeding development assistance and foreign investment combined (IFAD 2007). As employment opportunities in the United States and other developed countries decline, so will remittances to countries like Mexico, Bangladesh, and Ethiopia (Ghosh 2008).

Less Trade

The United States and Europe are the most important buyers of goods produced in the developing world and, as these areas sink into recession, their consumption will drop. Tourism and hospitality, a significant source of employment in developing countries, are also expected to experience declining demand and cancellations (Ghosh 2008).

Fewer Investments

With the financial crisis also comes a reduced appetite amongst investors for taking risks. Private investment into developing countries, which has been booming for the past five years, is therefore likely to fall. Already the construction sector has taken a hit, with many large projects cancelled (Ghosh 2008).

The combined effect from these impacts is likely to be rising unemployment and credit shocks. As a result, tens of millions more may be pushed below the poverty line. It is predicted that this could spark social unrest, undermine governments and increase famine, disease, violence and extremism (Richter 2008).

The Hunger Project and Investing in Change

Despite these disheartening conditions, we at The Hunger Project know that change is possible. It requires, however, that we invest in the future we want to achieve.


You can support a better tomorrow through investments that are effective and sustainable. And, an investment in The Hunger Project is the highest leverage contribution you can make. Our programs in Africa, South Asia and Latin America are mobilizing people at the grassroots level to become self-reliant. They are ensuring that communities are able to meet their own basic needs, be more resilient and have greater likelihood of withstanding current and future challenges.

The Hunger Project builds the capacity of women and men in the developing world, so that they, in turn, can invest in themselves, in their livelihoods, children, and communities. Supporting one another, we can create a better future for everyone.

Every new investment in The Hunger Project before December 15 will be matched - dollar for dollar. Your partnership is needed now more than ever. Take action now and double the impact of your money!

Sources:

World Bank. G20 Finance Ministers Meeting. Global Financial Crisis and Implications for Developing Countries. São Paulo, Brazil, November 2008.

IFAD (International Fund for Agricultural Development).Sending Money Home: Worldwide Remittance Flows to Developing and Transition Countries. Rome, Italy, December 2007.

Ghosh, Jayati. "The Financial Crisis and the Developing World." South-North Development Monitor #6578 (October 29, 2008).

Richter, Paul. "Economic Crisis Threatens to Destabilize Countries." Latimes.com, Oct. 27, 2008. http://www.latimes.com/news/nationworld/world/la-fg-crisis27-2008oct27,0... (accessed November 15, 2008).