The International Monetary Fund and the world's big development banks on Friday warned that emerging and developing nations face dire consequences from a growing global economic crisis and will not be able to afford big bailouts to save their financial sectors.
"In emerging and developing economies the consequences go well beyond economic contraction or reductions in growth," the multilateral development banks and the International Monetary Fund said in a joint statement following a meeting in Tunis.
"Unlike the advanced economies, these countries simply do not have resources to bail out their financial or other sectors, to provide a package of stimulus measures, or of social protection," they said. The lenders, which include the World Bank and regional banks, said their own resources were insufficient to deal with the needs of emerging and developing countries and called on member countries to rebuild the capital of the institutions.
"Our institutions will make full use of existing capital resources, but we emphasised this alone will not be sufficient given the scale of the challenges," they said. "We urge shareholders to support those of us who will need to raise additional resources, including through early general capital increases," they said, warning they may need to make cutbacks if more resources are not forthcoming.
The statement, issued by the African Development Bank in Tunis, underscores growing concern within the institutions that conditions for emerging and developing countries could deteriorate quickly as capital inflows decline dramatically and large emerging market corporate borrowers with big rollover needs are unable to obtain funding.