The global meltdown will cost developing countries over US$180 billion by the end of next year and over US$ 400 billion within three years, says anti-poverty charity ActionAid. $180 billion is enough to supply clean water to everyone in the world and put an end to maternal mortality.

The findings are revealed ahead of the G20 meeting in Washington, where leaders from developed and developing nations will gather this weekend to discuss how to resuscitate the world’s flagging economy.

Dr. Claire Melamed said: “While world leaders occupy themselves with how to fix the global economy, the damage being done to ordinary people, particularly the world’s poorest, must not be overlooked.  There is a real risk that the financial crisis will precipitate a serious social and economic crisis in poor countries, as their already precarious economies are forced into slower growth or even recession.”

ActionAid claims that the financial crisis will be marked by lower growth rates and high levels of unemployment across the developing world and that the impact will be considerable and negative.

Lost growth will be caused by lower earnings from trade due to declining commodity prices, slowdowns in the developed world’s markets, lower investment as firms cut back and falling remittances from relatives overseas as they suffer the impact of the recession.

Globally, the International Labour Organisation (ILO) is predicting that the number of ‘working poor’ earning less than $2 per day could rise by 100 million people. ActionAid is already hearing reports of jobs being lost in Ghana, Cambodia, Pakistan, China and India, as falling demand in rich countries is felt in the order books of firms in developing countries.

“Growth is not just about numbers, it’s about people. Lower growth and lost jobs could easily combine to create a poverty catastrophe. Yet it can so easily be fixed. Whilst $400 billion is a huge amount for developing countries, it is trivial compared with the $2,750 billion that the developed world has already spent bailing out the banks that are responsible for the crisis,” concluded Claire Melamed.

The World Bank has already said it expects almost 40 million people to fall into poverty as a result of the turmoil caused by the global credit crunch. ActionAid is proposing a ‘development package’ that will shore up the finances of poor countries and allow them to ride out the coming storm. It calls on world leaders to:

• Honour existing aid commitments
  
• Provide additional financing to support countries suffering the effects of the crisis and recession. Thanks to the lost growth, developing countries will need more than US$400 billion just to stand still over the next three years. Through a combination of debt cancellation, gold sales and refinancing, developed countries and the international finance institutions must find the resources to support affected countries.
• Stop the outflows from developing countries. As growth slows, trade revenues fall, and aid commitments become more precarious, it will be all the more important for developing countries to generate their own resources for development.  One key way to do this will be to lift the veil of secrecy that allows companies operating in developing countries to avoid tax. 
  

ActionAid – in coalition with UK civil society including trade unions, overseas development charities and environmental groups – is also calling on Gordon Brown to use his influence to make international economic institutions more democratic and accountable to all people, particularly the poorest. In a joint letter to the Prime Minister, the coalition is demanding that he acknowledge that effective government action is needed to manage economies sustainably.