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senecus      ( Date: 04-Feb-2010 01:06) Posted: Prospects and implications for developing country financing needs Global Economic Prospects 2010: Financial markets Available in: Español, Français, 中文 Page 1 of 1 Overall, net private capital flows to develop­ing countries in 2009 are estimated to have fallen by $795 billion (relative to their high in 2007), or by almost 70 percent. Even with re­covery on the horizon, projected flows in 2010 are only $517 billion, or 3.2 percent of GDP. Lower-income countries will suffer the most from this shrinkage, because their already min­iscule share of total private capital flows (i.e., 2.6 percent in 2007) is expected to dwindle to almost nothing in 2010. Even though small in absolute terms, the capital inflows to these low-income countries represent a significant share of national income and investment, and their loss will certainly have a severe impact on the ability of these countries to meet their financing needs in the short to medium term (see chapter 3). While capital inflows have declined sharply, the ex ante financing needs of developing countries have not changed.significantly. Based on the current account deficit projections for 2010, along with schedules of private foreign debt coming due, the total external financing needs of developing countries are expected to be on the order of $1.1 trillion in 2010, com­pared with an estimated $1.2 trillion in 2009. Countries in Europe and Central Asia and Latin America and the Caribbean face the larg­est external financing needs in 2010, projected at $447 billion and $280 billion, respectively. Although smaller in magnitude, Sub-Saharan Africa's financing needs are also large, standing at nearly 12 percent of GDP.   Combining these projections with country- specific estimates of the amount of private sec­tor financing likely to be forthcoming suggests that developing countries could face a total financing gap of as much as $315 billion in 2010. In 2009 those countries whose ex ante financing needs exceeded private capital inflows were forced to bridge the gap either by cut­ting into domestic demand and via exchange rate depreciation—thereby reducing their trade deficits via lower imports, or by using other resources such as drawing down international reserves or drawing upon official assistance (or both). Overall, developing countries con­sumed some $362 billion worth of their in­ternational reserves during the initial phases of the crisis, while a wide range of countries increased borrowing from the international Monetary Fund (IMF), the World Bank, and various regional and bilateral development agencies. Currently, an overall count of the in­crease in official flows is unavailable, but the World Bank (International Bank for Reconstruc­tion and Development, or IBRD, and IDA) alone increased its lending commitments by some $12.8 billion, while the IMF made an additional commitment of $70 billion by October 2009. The IMF's lending resources are being tri­pled, to $750 billion, including a new special drawing right (SDR) allocation of $283 billion. However, since SDRs are allocated accord­ing to country quotas, the benefits of this move for the neediest developing countries are small.

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