World Bank warns debt crisis could engulf poor countries

The sluggish rich-world economy could reverse progress on tackling global poverty as developing countries run out of fiscal space to run much-needed social programmes, the World Bank warned Wednesday ahead of the Group of 20 (G20) summit this weekend.

With Europe mired in a debt crisis and consumer demand weak across the wealthy world, the World Bank warned that many developing countries, too, could come under "serious financial strain" in the coming years.

The global economic crisis has depleted the coffers of many poorer nations over the last two years, and many were fast running out of resources to pay for social programmes that keep their people out of poverty.

"A scarcity of resources to mount appropriate policy responses can jeopardize years of progress in combating poverty," the World Bank said in a background paper to G20 leaders, an advanced copy of which was obtained by The German Press Agency dpa.

World leaders have faced criticism for signalling that they may step back on aid commitments at this week's summits in Canada of the Group of Eight (G8) industrial nations and larger G20 bloc of leading wealthy and developing countries.

The World Bank said the global economic recovery stood at a "crossroads" and risked undermining progress towards the Millenium Development Goals, a series of poverty targets set by world leaders to be met by 2015.