Low-income countries need $440bn over 5 years to accelerate growth – IMF
The International Monetary Fund (IMF) has estimated low-income countries’ additional financing needs to accelerate growth and put them back on a path to income convergence with advanced economies to be about $440 billion over the five years through 2026.
This comes as the Washington based Fund revised down its growth projections for low-income countries, whose per capita income growth is falling further behind the rates needed to catch up with advanced economies. This threatens to reverse a decades-long trend of steadily converging living standards.
Kristalina Georgieva, IMF managing director, said this in the Fund’s new blog titled, ‘The Time Is Now: Richer Nations Must Step Up Support For The Poorest’, released on Friday.
Domestic reforms to boost growth, strengthen public finances and raise more domestic revenue should help address this financing need.
The challenges facing low-income countries have grown immensely in recent years. They have suffered from the pandemic as well as a succession of economic shocks. And today they face additional challenges from scarcer financing, high inflation, persistent food insecurity, rising debt vulnerabilities and sociopolitical tensions, especially in fragile and conflict-affected states.
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She said since the pandemic, the IMF has supported more than 50 low-income countries with some $24 billion in interest-free loans via the Poverty Reduction and Growth Trust (PRGT) thus helping to stave off instability in a wide range of the world’s poorest nations, from the Democratic Republic of Congo to Chad and Nepal.
At the onset of COVID, the IMF rapidly scaled up emergency financing and program support through the PRGT, with new commitments reaching almost $9 billion (6.5 billion special drawing rights) in 2020 alone. And with low-income countries’ financing needs rising fast, demand for PRGT lending is projected to reach nearly $40 billion (SDR 30 billion) in 2020-24, more than four times the historical average.
“Clearly, when the finance ministers and central bank governors of our 190 member countries arrive in Washington next week, there will be plenty to discuss. But these leaders must not allow other challenges to crowd out the pressing needs of the world’s poorest nations.
Supporting the PRGT is an excellent way to keep this issue at the top of the global agenda,” she said.