During 2008-09, higher food prices may have increased the number of children suffering permanent cognitive and physical injury due to malnutrition by 44 million. Many of the countries most exposed to rising global food and fuel prices are those with high pre-existing levels of malnutrition. Financial institutions in developing countries are beginning to suffer from a lack of short term liquidity, as retail deposits exit and non-deposit funding dries up. As the effects of the global recession spreads, the impact will be felt on financial sector asset quality, leading to the need for recapitalization of financial institutions. Lack of liquidity will also reveal underlying weaknesses in regulatory frameworks and in the management of financial institutions, requiring regulatory reforms and capacity building. Tight credit markets in developing countries are rapidly affecting the real sector, especially sectors reliant on trade, finance and working capital. Impact on the South Asia While some countries in South Asia had relatively less exposure to the crisis through adverse effects on capital flows, they remain vulnerable to global economic slowdown through export earnings, remittances and external financing of infrastructure. Growth in South Asia decelerated in 2008, falling from 8.6% in 2007 to below 7% based on estimate as of last December 2008. It is projected to decline further to around 6% or below in 2009, before recovering to around 7% in 2010. Even at these reduced growth rates, South Asia stands out compared to the recession in the developed economies. Nevertheless, with 900 million people in developing Asia surviving on $1.25 a day – more than half of those in South Asia – any tempering of growth is a serious case of concern. We believe, there are four inter-related impacts of global economic downturn on Asia. First, economic slowdown would result in reduction of exports with the attendant effects, not only on export-oriented, value-added industries themselves, but industries across the value chain. This impact could manifest itself in the form of unemployment and a reduction in GDP. Second by, the impact is being felt through the financial system. By this, we mean that the outflow of foreign direct investment from Asia’s financial markets result in depressed domestic equity markets and contribute to conservative lending strategies. Third by, impact relates to liquidity in domestic financial markets. If credit availability remains constrained, it is likely to be even more constrained for the lower end of the market, i.e.,>