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Declining Oil Prices May Undermine Development and Humanitarian Aid

UNITED NATIONS, Jan 18 2016 (IPS) - The sharp decline in oil prices in the world market -– the lowest in nearly 13 years –- is expected to have a devastating impact on both developed and developing nations.

As the price of oil hit a new low of less than $30 per barrel last week — compared to $110 in 2014 — the economic realities are gradually coming into play.

As the New York Times put it, the long slide in oil prices means “oil rich nations are not so rich anymore.”

And predictably, the so-called “oil-rich nations” of a bygone era may vanish from market vocabulary.

The world economy is already suffering from a slowdown in China and the appreciation of the US dollar– resulting in rising anxieties in global markets.

Meanwhile, the decline in oil prices is also expected to drain the $7.2 trillion in sovereign-wealth funds, mostly built on oil and natural gas revenues, held by oil-producing countries, including Saudi Arabia, Kuwait, Qatar and the United Arab Emirates.

With the lifting of US sanctions on Iran – the world’s seventh largest oil producer in 2014– there will be a further glut in the market, forcing prices down with negative consequences on the global economy.

Closer home, UN agencies which depend heavily on Western industrialized nations for core and non-core “voluntary contributions” are preparing for the worse.

Asked for a comment, UN deputy spokesperson Farhan Haq told IPS that while Secretary-General Ban Ki-moon understands the economic realities that member states face, “it is crucially important for nations to continue to provide generously to development assistance and humanitarian aid.”

A new UN report, by a High-Level Panel on Humanitarian Financing, released Friday, says there will be a 15 billion dollar shortfall in funding for humanitarian emergencies in 2016.

Titled “Too Important to Fail – Addressing the Humanitarian Financing Gap,” the study warns of a growing gap between the increasing numbers of people in need of assistance and sufficient resources to provide relief.

Asked about declining aid, Ban told reporters last month he appreciates the difficulties and challenges facing many European countries.

“At the same time, I commend such compassionate leadership and generous support for many refugees who are seeking better opportunities and safety. “

“While I appreciate such difficulties, I ask the rich countries, the European countries, to increase their financial support and generous support for all these migrants and refugees, rather than diverting their already earmarked development aid.“

Ban said he realizes there is a limit to resources. “So inevitably, they may have to temporarily divert and use this development money for humanitarian purposes but in the longer term, if this kind of trend continues, it will only perpetuate this bad balancing between humanitarian and development.”

In its report, the high-level panel makes several recommendations, including the following:

— Reclassifying the eligibility criteria of the World Bank’s International Development Association (IDA), so that funding follows people in need — and not countries– to enlarge opportunities to middle-income countries (MICs).

— A far higher proportion of official development assistance (ODA) to be directed to situations of fragility and protracted emergencies, and oriented towards building resilience and reducing fragility.

— Tripling IDA’s Crisis Response Window and expanding the funding capacity for emergencies in other development finance institutions.

— A voluntary sign-up by governments to a “solidarity levy” mechanism to fund humanitarian aid.

— And channelling Islamic social finance and other instruments to humanitarian causes.

“Our starting point was the stark facts and figures: 125 million people in need; a record $25 billion a year going to aid them; but, in spite of that, the needs continuing to outpace resources,” said the report’s co-chairs, Kristalina Georgieva of Bulgaria and Sultan Nazrin Shah of Perak, Malaysia.

“A gap of $15 billion is a lot of money but in a world producing $78 trillion of gross domestic product (GDP) it should not be out of reach to find. Closing the gap would mean nobody having to die or live without dignity for lack of money and a victory for humanity at a time when one is greatly needed.”

As this report points out, Ban said, more than 120 million people live in constant distress, without jobs, food, water, shelter or health care.

“If they were all in one country, I am told that it would be the eleventh largest country on earth. And it would be one of the fastest growing nations.”

“And if our world were a school, it would have few spaces for needy children – as you know we have 60 million children out of school.”

This is not an abstract analogy, the Secretary-General said, pointing out that three quarters of a million Syrian children last year were shut out of classes because “we could not fund their right to an education.”

The United Nations, he said, is working every hour of every day to address the complex root causes of crises. “We also rush to fight fires. So many fires are burning around the world.”

Ban said he was serving as Secretary-General of the United Nations at a time of tragic records.

Since the UN was founded, the world has the most-ever people in need of humanitarian assistance and the highest-ever amount funding appeals. “We also face the biggest-ever appeal shortfalls.”
And last year, he said, nearly half of the UN’s appeals were unmet.

But with oil prices taking a severe beating and world economies shrinking, the prospects for humanitarian and development aid in 2016 seem bleak.

The writer can be contacted at thalifdeen@aol.com

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