ANALYSIS-Credit crisis threatens disastrous squeeze on aid

from Reuters

By Laura MacInnis

GENEVA - Paying hundreds of billions of dollars to rescue the world's financial industry looks set to squeeze humanitarian aid and crimp international efforts to fight disease, feed hungry children, and shelter refugees.

Charitable giving and foreign aid flows are likely to dry up as the global economy sours, with rising unemployment and inflation pinching already-tight household budgets, and as big corporate bailouts push governments to the fiscal brink.

Celine Charveriat, Oxfam's deputy advocacy and campaign director, warned of "disastrous consequences" for poor countries if the bank crisis and related belt-tightening prompt donors to cut aid from a current $104 billion a year, as many expect.

"Donors must not make overseas aid the first victim of the economic crisis," Charveriat said.

Washington in particular would be under severe pressure to pare its international aid spending after agreeing a $700 billion financial rescue package, said Steve Radelet, a senior fellow at the Centre for Global Development.

"It is imperative that this pressure be withstood," he said, warning a U.S. pullback could prompt other Western donors to cut their contributions as well, or delay coughing up pledged funds.

ECLIPSE

Radelet, a former U.S. Treasury Department official, said financial woes were likely eclipse development issues in future meetings of G8 world leaders, which until recently focused on anti-poverty goals and aid pledges.

"Foreign assistance is not going to have the pre-eminent role that it has had in past years," he told Reuters.

U.N. agencies said they were bracing for a difficult period.

"Will it have an impact? Of course. We are likely to face a period of financial constraint," a World Health Organisation official said.

The WHO's campaigns to fight diseases such as polio, malaria, tuberculosis and AIDS are funded by governments and philanthropic institutions, and "both are likely to be affected by the current financial downturn", he said.

Antonio Guterres, the U.N. High Commissioner for Refugees, told donors at an annual meeting on Monday that he recognised the financial environment would raise challenges for those who have traditionally funded UNHCR programmes.

"At the same time, I must point out that the resources required to support the 31 million people we care for are very modest indeed when compared the sums being spent to bring stability to the international financial system," Guterres said.

"It would be tragic if the funds available to the humanitarian community in general and the UNHCR in particular were to decline at the very time when the demands upon us are increasing so dramatically," he said.

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