The world is suffering the most massive economic shock since1929, and one that has painfully exposed the systemic flaws in financial markets....

It is a prospect that makes international aid flows so much more important. And yet there are already signs that the financial crisis may encourage rich country leaders to neglect even further their promises to increase aid. Already overall levels of aid have fallen for two years in a row and the UK remains the only G8 country to have set out a clear timetable for meeting the commitments that were promised, famously, at the Gleneagles G8 Summit of 2005.

Currently the world is off-track to meet the 2010 aid targets by approximately $30 billion and governments need to find an additional $18 billion dollars per year (2008 exchange rates) between now and 2010 to ensure we are back on track.

The multiple bank bailouts are graphic proof that rich country governments can find trillions of dollars at high speed when they judge it necessary. Aid to all developing countries last year was $104 billion.

In comparison, the US and EU mobilized nearly 30 times this, around $3 trillion, in the last few months to help bail out their banks…!!!!!!!

There is no doubt that money for developing countries is available, the only question (?) is over the political will of rich countries to use it.

The bailout measures will call for mobilizing savings, allocating capital and managing risk. And the collapse of confidence and liquidity looks set to hit developing countries hard - from farms in Kenya to factories in Bangladesh, the poorest people in the world will pay a high price for the follies and excesses of a few.

The scenario in India, though a wee bit better, is fast receding by the day…

Ironically, the massive interventions by governments have shown that in times of crisis, rich country leaders do not practice what they have preached to others for decades. When the financial crisis hit East Asia in 1997, countries were forced by the International Monetary Fund (IMF) to cut spending, deregulate and liberalize: the exact opposite of the actions taken by rich countries today.

The economic crisis has also highlighted something that had already become apparent: the multilateral institutions of the 20th century are woefully unsuited to 21st century realities. The mandates and powers of the World Bank and International Monetary Fund (IMF) should be thoroughly reviewed and reformed.

The World Bank must support developing countries to plan for, and protect against, future shocks, with a strong emphasis placed on the implications for health, education and agriculture spending.

The IMF will also need to change the way it does business. The Fund has just reformed its loans for countries affected by shocks, but the changes were inadequate. Countries will still not be able to borrow as much as they need, and part of that money will be subject to high numbers of conditions.

All financial institutions, including the IMF, need to improve their transparency standards if they’re to play a legitimate role in responding to the financial crisis. The importance of this has become all the clearer as evidence grows that the poor are set to pay the highest price for the financial turmoil.

The World Bank estimates that a decline of growth in developing countries by 1% traps an additional 20 million people in poverty. November’s World Economic Outlook projections lowered predicted growth rates for developing countries from 6.4 to 4.5 percent - suggesting that an estimated 40 million more people will be pushed into poverty in 2009 due to the financial crisis.

It is a forecast that highlights the extent to which the notion that the developing world could “decouple” from problems in the industrialized world has broken down as the global financial crisis has intensified.

Many countries with relatively developed financial markets have seen large falls in their stock markets. The Nigerian stock market has lost a third of its market capitalization ....

In other countries, the relative lack of development of the financial sector may mean that they have so far been shielded from the worst impact of the crisis. Ethiopia, for example, is one of the least monetized economies in the world, with 85% of the population having little access to banking and financial services. However, like in many of the very poorest countries (those who were hit hardest by the spikes in food and energy prices in 2008), it appears that declining trade, foreign direct investment (FDI) and remittances, and rising unemployment will quickly start to take their toll.

Meanwhile in Bangladesh, where remittances are the second-biggest source of foreign income, millions of families (at least one in every village) will be hit by their decline.

In Democratic Republic Congo at least 200,000 jobs have already been lost following a collapse in mineral prices !!

Overall, the International Labour Office has estimated that that an additional 20 million people will be unemployed before the end of 2009, and the number of workers living on less than one dollar a day may increase by 40 million.

Faced with lower growth rates and reduced sources of finance, many poor country governments may be forced to cut back their public spending on vital infrastructure projects, health care and social protection. These are the very programmes that people living in poverty need during times of crisis and, without them, millions of people won’t be able to meet their basic needs. Poverty and inequality will be exacerbated and women and children will suffer most as they take over responsibility for providing the resources and services that their governments cannot provide.

Poor countries are still reeling from the impacts of higher food prices, and facing increasing challenges from climate change. Many are badly equipped to deal with the widespread impacts of the financial downturn. It is a time of unprecedented global challenges.

If ever there was a moment for an unprecedented global response, it is now.