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    UNDP head warns on inflation for world's poor

    Hurriyet English with wires
    07.05.2008 - 15:40 | Son Güncelleme:

    Emerging markets like Turkey and Brazil will face grave problems in controlling inflation and money supply because of the expansionary economic policies of industrialised countries, Kemal Dervis the head of the UNDP said on Wednesday.

    "This may cause us a lot of headaches in the next two or three years," said Kemal Dervis, United Nations Development Programme (UNDP) administrator and the former economy minister of Turkey, was quoted as saying by the Financial Times.  "We are seeing excessively expansionary economic policies, just as we did when the dot.com bubble burst." Dervis added.

    In an interview with the Financial Times, Dervis said that the urban poor in developing countries were already facing an "inflation tsunami" from soaring food and energy prices, which had made them up to 25 per cent poorer in less than a year.

    "We face a new phenomenon of commodity prices going through the roof at a time of recession, or at least slowdown, in the advanced economies. I cannot help feeling that liquidity in the system is looking for an outlet," he said.

    "But how can you tighten your monetary policy in an emerging market when the Fed is lowering interest rates? Countries like Turkey and Brazil, which have been fighting inflation for years, are now facing a real-inflationary danger that does not result from a macro economic cycle, but from the need to bail out the financial sector." Dervis said. 

    In a unique situation, Kemal Dervis, who had no party affiliation, was invited by the Turkish Parliament to serve as Turkey’s minister for economic affairs and head the Treasury from March 2001 to August 2002. He also led Turkey's recovery program after the financial crisis that hit the country in February 2001.



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