IRIN: Charity coffers face credit crunch

With the US going through the most significant financial restructuring since the great depression, international aid agencies and NGOs have reason to be wary, observers said.

The likelihood that the US administration will need to divert up to US$700 billion or more to keep US banks afloat seems almost certain to diminish US enthusiasm for large-scale funding of projects abroad. At the same time, rising food and fuel prices are hitting the world’s poor hardest. The World Bank reports that in many developing countries, food prices have risen 83 percent over the past three years.

Liliana Rojas-Suarez of the Center for Global Development, wrote that the ripple effects of the slowdown were likely to be protracted and would not all show up at the same time. She warned that the crisis would cut demand for many goods and commodities that developing countries needed to export to sustain their own economies. The squeeze on international credit was also likely to make investors much more cautious about involvement in new projects.

“If a country goes into a recession, it is pretty hard for a development minister to argue that there should be an increase in foreign aid,” said Robert Glasser, secretary-general of CARE International, adding that international aid was more likely to stagnate than come to a complete halt. “Politically, it is usually much easier to stop or delay an increase in foreign aid than to stop it altogether. Usually, at a minimum, they keep the aid flow level and delay the increase.”

Read more on the IRIN website.