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Finance & Development
A quarterly magazine of the IMF
September 2005, Volume 42, Number 3

In Brief

AIDS battle needs urgent new funding

Some $22 billion will be needed to reverse the spread of AIDS in the developing world in 2008, up from $8.0 billion available in 2005, according to the latest estimates by UNAIDS (see Table 1). The UN agency says that some 40 million people are living with the virus and close to 5 million people were newly infected with HIV in 2004 alone (see Table 2).

Sub-Saharan Africa remains the world’s worst-affected region. While it accounts for just over 10 percent of the world’s population, it is home to more than 60 percent of all people living with HIV. The Caribbean has the world’s second highest level of infection, and AIDS has become the leading cause of death in the region among adults aged 15–44. While rates of infection are lower in Asia, the agency warns that without immediate action, the Asian region could witness an additional 12 million new infections during 2005–10.

At this stage of the epidemic, there are more new HIV infections every year (around 5 million) than AIDS-related deaths (around 3 million), but only 15 percent of those needing treatment worldwide are receiving it. The number of new infections must be dramatically reduced in the next few years to ensure that scaled up antiretroviral treatment remains economically and socially sustainable. The implementation of a comprehensive HIV prevention package could avert 29 million (around 63 percent) of the 45 million new infections that had been forecast during 2002–10.
Africa will focus on the issue in December when Nigeria hosts the 14th International Conference on AIDS and Sexually Transmitted Infections in Africa (ICASA). "Any serious discussion about alleviating poverty in Africa must confront the challenge of AIDS and the severe conditions it has created within families," Nigerian President Olusegun Obasanjo, the current chairman of the African Union, told a press conference.

Table 1.
Escalating costs

Far more resources are needed for AIDS prevention.

Projected AIDS resource needs (billion dollars)
Treatment and care
Orphans and vulnerable children
Program costs
Human resources

   Source: UNAIDS.

Table 2.
AIDS by region

Africa has the world’s highest infection rate, but the Caribbean also has high levels of HIV.


Sub Saharan
Latin America
North America/
  Western and
  Central Europe
Eastern Europe
   and Central
Middle East and
   North Africa
with HIV

25.4 million

8.2 million
1.7 million
1.6 million

1.4 million



39.4 million
in 2004

3.1 million

1.2 million




4.9 million
in 2004

2.3 million





3.1 million







   Source: UNAIDS.

Encouraging breastfeeding

Better infant feeding practices in the first two years of life, including breastfeeding exclusively in the first six months, could prevent almost one-fifth of all child deaths in the developing world, according to the United Nations’ Children’s Fund (UNICEF). Infants who are not adequately breastfed are left with limited defenses against fatal diseases like pneumonia and diarrhea and lack essential nutrients to develop body and mind. Currently, an estimated 63 percent of children under six months old in the developing world are not breastfed adequately in the critical period, if at all.

"Exclusive breastfeeding is ideal nourishment for babies up to six months old," said UNICEF Executive Director Ann M. Veneman. "In a developing country, a child that is not breastfed is about three times more likely to die in early infancy than a breastfed child, and exclusive breastfeeding reduces the risk still further."

Tsunami follow up

Pushing ahead with Secretary-General Kofi Annan’s call for global early warning systems covering all countries and all hazards, the United Nations is convening a conference next year to reinforce lessons learned from last December’s Indian Ocean tsunami and agree on fresh initiatives in high priority countries.

"Early warning and preparedness are the critical elements in preventing natural hazards from turning into disasters," Sálvano Briceño, Director of the secretariat of the International Strategy for Disaster Reduction, said recently. The 3rd International Early Warning Conference will be held in Bonn from 27 to 29 March.

"The conference’s main outcome will be the launch of a range of short- and long-term early warning projects in high priority countries," he explained.

Help workers adjust, OECD urges

Developed countries must create dynamic job markets if they are to reap the full benefits of globalization and avoid a backlash against open trade, according to the Organization for Economic Cooperation and Development (OECD). "Job losses in some sectors, along with new job opportunities in other sectors, are an inevitable accompaniment of the process of globalization," the OECD says in its 2005 Employment Outlook. "The challenge is to ensure that the adjustment process involved in matching available workers with new job openings works as smoothly as possible."

Rising imports, outflows of foreign direct investment (sometimes tied directly to the relocation of production) and inflows of immigrants all contribute to rising job insecurity in OECD countries. The rapid integration into the world trading system of China and India, with their huge pools of low-wage labor, and the recent enlargement of the European Union have fuelled fears of job losses and wage cuts.

Specifically, the OECD urges governments to:

  • ensure that working is more rewarding financially than living off welfare, if necessary through in-work benefits that supplement wages;
  • provide adequate income support in the event of job loss and help job-seekers find new jobs quickly by providing effective counseling, training, and other re-employment assistance;
  • ensure that employment services are managed effectively to provide as much individualized support to job-seekers as possible; and
  • stipulate that firms facing lay-offs give their employees sufficient advance notice, and that effective re-employment services are provided during the period of advance notice, for instance by dispatching employment agency staff on-site.

The OECD’s call to action is the latest in a series urging the need for reforms in its member countries in order to withstand competition from emerging economies. Employment levels are picking up slowly in OECD countries, it notes. On current trends, however, OECD countries will still have around 36 million job-seekers in 2006 (or 6.4 percent of the labor force), compared with 37 million in 2004 (or 6.7 percent of the labor force): about 35 percent of people of working age are without a job, and there are few signs of a significant improvement in the next two years.

Shift to grants for poorest

Financial support to poor countries through the World Bank’s International Development Association (IDA) will increasingly be in the form of grants. IDA countries agreed in April that financial support to poor countries will now take systematic account of vulnerability to debt. The countries facing the toughest debt problems, mostly in sub-Saharan Africa, will get all of their support in the form of grants, while less debt-burdened countries will receive IDA's highly concessional long-term loans (interest-free credits with a maturity period of 40 years and a grace period of 10 years), or in a few cases a mixture of grants and credits. It is expected that, as a result, around 30 percent of total IDA support in the coming three years will be on grant terms, compared with 19.5 percent in the previous three-year cycle.

At the same time, donors agreed on measures to help offset the financial impact of grants on IDA's ability to support poor countries in the future. IDA’s Board of Governors approved the 14th replenishment of IDA’s resources on April 18, 2005. Under IDA14, at least $34 billion will be made available to the world’s 81 poorest countries during the coming three years.

Promoting financial stability

Six years after the IMF and World Bank launched a standards and codes initiative to promote data transparency and set benchmarks for good financial practices, a progress report shows that member countries rate the initiative fairly high in terms of its overall worth—especially for identifying vulnerabilities and setting priorities for strengthening domestic institutions. But the initiative is not yet seen as having had a commensurate impact on actual reform implementation, which may partly reflect the substantial time needed to introduce reforms.

Participation has been high for emerging market countries and advanced economies, and somewhat lower for developing countries—although these countries now constitute the bulk of first-time participants. Regional participation rates have varied, with involvement highest in Europe, including Eastern Europe, and lowest for East Asia and sub-Saharan Africa. So far, 122 countries have participated, with 723 assessments and updates completed by April 2005.

Events coming up in 2005–06

September 14–16, New York
United Nations Conference to assess Millennium Development Goals

September 24–25, Washington D.C.
IMF and World Bank Annual Meetings

November 16–18, Tunis, Tunisia
World Summit on the Information Society

December 4–9, Abuja, Nigeria
International Conference on HIV/AIDS and Sexually Transmitted Infections in Africa

December 13–18, Hong Kong, China
WTO Ministerial Conference

March 27–29, Bonn, Germany
3rd International Early Warning Conference

April 3–5, Belo Horizonte, Brazil
Inter-American Development Bank Annual Meeting