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GUARDIAN Wed, 18 Aug 2010 13:43:04 GMT
The charity says a 'Robin Hood tax' should be imposed on greedy banks in the developed world to help low-income nations fill huge budget holes and avoid sinking further into poverty
The financial crisis has driven millions of people into poverty and put many more at risk as the world's poorest countries scramble to fill huge budget holes with dwindling help from richer nations, according to Oxfam.
With the deadline for meeting the Millennium Development Goals (MDG) of slashing poverty just five years away, and aid budgets under pressure from the downturn, Oxfam is stressing the urgent need for new sources of help, such as a 'Robin Hood tax' on financial transactions.
The charity is worried that much of the focus during and after the credit crunch has been on the fate of richer countries such as Greece, the US and the UK, while continued growth in emerging markets such as Brazil and India has been largely been taken as a sign the crisis was restricted to developed nations.
But its study of the budgets of 56 low-income countries, many of them in Africa, concludes that they too propped up their economies by borrowing in the earlier part of the crisis, and have now been left with gaping budget deficits.
"It is brutally unjust that the poorest people on earth are made to pay the price for bankers' greed through cuts in schools or life-saving medicines," said Max Lawson, spokesperson for the Robin Hood Tax Campaign and policy adviser at Oxfam. "A Robin Hood tax would make the banks foot the bill for the misery they have caused."
The first detailed analysis of the impact on poorer countries says revenues fell in almost two-thirds of them last year and for almost half, revenues will still be below 2008 levels by the end of 2010.
"Even if the rich world recovers, the crisis will still be wreaking havoc in the poorer countries," says the report, commissioned by Oxfam from Development Finance International.
The crisis created a "huge fiscal hole" of $65bn (£41.4bn), it adds, as budget revenues slumped by $53bn in 2009 – nearly a 10th of pre-crisis revenues – and by a further $12bn in 2010.
The report concludes that "because the international community's response to the crisis had been so slow", low-income countries (LICs) have had to fill two-thirds of that fiscal hole by borrowing domestically – usually an expensive choice — or by running down reserves. That sparked deep spending cuts which have hit education and social protection, pensions, in particular.
The authors criticise the International Monetary Fund, which has backed many of the countries, for appearing to retreat to its "traditional position" and not providing enough flexibility on unwinding deficits without harming development spending. The countries with IMF programmes are highlighted as having done better so far on overall MDG spending but the body is slammed for its apparent lack of research into the area.
"Five years away from the deadline for reaching the Millennium Development Goals, it is scandalous that no international organisation is tracking MDG spending in the way that this report has done at the level of individual low-income countries," says the research.
"If these changes are not made, the fiscal hole caused by the crisis risks becoming a 'black hole' into which the MDGs, and the lives and education of many of the world's poorest citizens, will disappear."
As fiscally squeezed richer nations push through cuts to reduce their deficits and to protect their credibility in financial markets, aid budgets are coming under increasing scrutiny. In the UK, the government's aid budget has been ringfenced from cuts, but ministers are still under pressure to find savings.
Oxfam and other anti-poverty campaigners are worried this comes in the hour of greatest need for many poor countries. "Recent trends in many donor countries have been to reduce aid pledges, concentrate aid on fewer countries, and focus on only a few of the MDGs," its report says.
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