Use Aid Cash Wisely Amid Crisis: Sri Mulyani
Washington. As developing nations face weaker growth prospects over the next two years because of the euro zone debt crisis, making the most of scarcer aid dollars will be vital, World Bank managing director Sri Mulyani Indrawati said on Tuesday.
Sri Mulyani said the biggest challenge for developing countries now was how to minimize the fallout from the euro zone crisis, which was likely to be felt through a decline in trade, workers’ remittances and investment.
She said that ending uncertainty around the euro zone crisis, which was driving up borrowing costs across the world, should be the focus of European policy makers.
“Ending this uncertainty is so important,” said the former Indonesian finance minister.
“For many developing countries the choice is tougher because they have to choose between defending their fiscal soundness and sustainability.”
Sri Mulyani said options in developing countries were already limited because the current crisis was following so soon after the last global financial meltdown of 2009, which drained the resources of poor nations.
With budgets of rich but often highly-indebted Western donors under pressure, Sri Mulyani said it was important that aid be made to work better through more transparency and results-driven antipoverty programs.
She said the World Bank was adopting a scorecard that could help governments in poorer countries measure aid spending and its impact on reducing poverty.
“Donors are facing a real choice between maintaining or continuing their international aid commitments,” she said. “You have to be accountable for each dollar to taxpayers as well as beneficiaries, which are the poor people in developing countries.”
She said the arrival of new donors from fast-growing emerging powers like China or Brazil meant more focus should be put on better coordinating development program to avoid overlap.
Traditional donors have long worried that new donors will repeat mistakes they have long struggled to fix, such as the billions of dollars in debt amassed by poor countries during the 1970s and 1980s that have since been canceled.
“The strength of these new donors is not from their money but their experience and knowledge” in fighting poverty, Sri Mulyani said.
She pointed at social programs that target the poor in Brazil and Mexico that have radically reduced poverty and been replicated in Peru and even in New York City.
But Sri Mulyani said the new donors, including private sector-led initiatives to fight malaria and HIV/AIDS, had also forced institutions like the World Bank to modernize.
“We don’t want to be out of the game and we want to be seen as providing global leadership in development goals and convening and coordinating across donor agencies,” she said.
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