The financial crisis of 2007-2009 has been called by leading economists the worst financial crisis since the one related to the Great Depression of the 1930s. It contributed to the failure of key businesses, declines in consumer wealth estimated in the trillions of U.S. dollars, substantial financial commitments incurred by governments, and a significant decline. Both market-based and regulatory solutions have been implemented or are under consideration, while significant risks remain for the world economy.

The impact of the financial crisis is affecting the whole world and is threatening long term objectives like the achievement of the Millennium Development Goals(MDGs). Not only the developed countries, but increasingly emerging economies and least developed countries are suffering the effects of this global financial crisis. Financial markets have collapsed, lending and investments opportunities are declining and exports are falling as demand decreases. In addition, developing countries, facing already higher food and energy prices, lack the means and resources to protect their financial institutions or banks from bankruptcy. The results are falling stock markets, rising interest rates, and less government resources for socio-economic investments that benefit the poor.

The Financial Crises and the Developing World

For the developing world, the rise in food prices as well as the knock-on -effect from the financial instability and uncertainty in industrialized nations are having a compounding effect. The impact of financial crises is not only on the developed country but also on the developing countries that are dependent on commodities for import or export.

Commodity dependent economies are exposed to considerable external shocks stemming from price booms and busts in international commodity markets.

Market Liberalization and privatization in the commodity sector have not resulted in greater stability of international commodity prices. There is widespread dissatisfaction with the outcomes of unregulated financial and commodity markets ,which fail to transmit reliable price signals for commodity producers.

Global crisis to pull down India’s GDP to 5.8% in FY10: IEG

Institute of Economic Growth (IEG) reported that the impact of the global economic