Foreign aid plea in uncertain times

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By David Loyn BBC News international development correspondent There were a few lighter moments during the meeting at Downing StreetThe leaders of the world's two key financial institutions paid a visit to Gordon Brown on Wednesday to talk foreign aid in turbulent times.

The impact of the global downturn on the poorest people in the world was top of the agenda when the heads of the World Bank and International Monetary Fund (IMF) met the prime minister in Downing Street on Wednesday.

Mr Brown will chair the London meeting of the G20 group of the world's larger economies on 2 April, and the World Bank and IMF chiefs want to make sure that solutions do not ignore the needs of developing countries.

2009 is going to be fraught with dangers and uncertainties IMF head Dominique Strauss-Kahn <a class="" href="/1/hi/uk_politics/7896935.stm">PM urges global 'grand bargain'</a>

The head of the World Bank, Robert Zoellick, has proposed a new "vulnerability fund" to help the poorest countries to be financed by 0.7% of the money the richest are spending to bail out their own economies.

After his meeting with Mr Brown he said he and the IMF head Dominique Strauss-Kahn had tried to suggest some new ideas.

He said: "2009 is going to be fraught with dangers and uncertainties".

There was a need to be "practical and pragmatic" recognising that it would be hard to argue for foreign aid when taxpayers in the developed world were losing their own jobs.

Poverty trap

The developing world has been hit hard by the global downturn in particular because remittances from foreign workers and commodity prices are down.

In much of Africa and parts of South Asia, these form a substantial portion of foreign currency earnings.

In a policy briefing note ahead of the G20 meeting, the World Bank has calculated that almost 100 million extra people will be trapped in poverty by the slowdown in economic growth, and that is on top of around 130 million people directly affected by the big rise in food prices last year.

Foreign workers sending money home have been hit by the global crisis

He pointed to some of the countries that had responded quickly to his demand to help, like Japan with $2 billion (£1.4bn) to fund recapitalisation of the banks in poorer countries, and another $1bn (£703m) for trade assistance.

He added Germany had pumped in an extra $500m (£352m) to assist liquidity in microfinance schemes, and another $500m for infrastructure schemes.

He said he was hoping to encourage China to give more support.

Among the more radical proposals for reform, there are proposals to replace the IMF and World Bank with a new global financial regulatory system.

Both institutions were set up to restore order after the Second World War in 1945.

Mr Zoellick said his primary interest was supporting clients, not changing structures, but there was a need to be open to "both dangers and opportunities in the system.

"Institutions do have to change".