Countries Hurt by War and Fragility Need Strong Global Partnerships, Resources
IMF Blog, December 22, 2022
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Bibliographic details
- Authors: Jihad Azour, Franck Bousquet, Abebe Aemro Selassie
- Published: December 22, 2022
Current situation and risks
- Fragile and conflict-affected states (FCS) are home to 1 billion people across more than 40 countries.
- These countries face long-standing challenges: poverty, low-capacity institutions, governance challenges, violence, and recent shocks from the pandemic and Russia’s invasion of Ukraine.
- Income per capita in fragile states is projected not to recover to 2019 levels until 2024.
- United Nations estimate: the number of forcibly displaced people increased to 100 million due to Russia’s war in Ukraine.
- The influx of almost 8 million Ukrainian refugees into neighboring European countries creates short-term fiscal costs and policy challenges for labor market integration and access to social services.
Regional impacts and key statistics
- Sub-Saharan Africa
- Home to about half of countries in the FCS category.
- Consumer prices have increased by more than 20 percent on average this year.
- Public debt is approaching 60 percent of gross domestic product.
- Forecast: economic growth in seven countries—Burkina Faso, Central African Republic, Comoros, Eritrea, Mali, Nigeria, and Zimbabwe—will be below the regional average of 3.6 percent this year.
- Food insecurity: 123 million people, or 12 percent of the region’s population, face acute food insecurity, equivalent to two-thirds of the worldwide total.
- Middle East and North Africa (MENA)
- More than one-third of countries in the region are FCS.
- Growth has remained sluggish at less than 1 percent.
- Per capita GDP continues to decline.
- Consumer prices are projected to rise by more than 30 percent on average this year.
- Inflation will remain in double digits in 2023.
- Public debt as a share of GDP is forecast above 60 percent.
Priority 1 — Tailored multilateral engagement
- International financial institutions (IFIs) should remain engaged in stabilizing fragile and conflict-affected economies and fostering inclusive growth.
- Recent institutional developments:
- African Development Bank updated its fragile states strategy.
- European Investment Bank adopted its first fragile-states strategy.
- World Bank and Asian Development Bank have taken similar steps since 2020.
- IMF launched its Strategy for Fragile and Conflict-Affected States in March to strengthen support tailored to constrained policy space in these countries.
- Examples of IMF support:
- Mozambique: program supports vulnerable households through cash transfers, including people forcibly displaced by conflict in the North.
- Somalia: support to rebuild key economic institutions and foster stability and growth, including forthcoming debt relief under the Heavily Indebted Poor Countries Initiative with the World Bank.
- Yemen: policy advice to help stabilize its economy and reduce food insecurity.
Priority 2 — Financing is key
- Scale up financing to match challenges faced by FCS.
- IMF and global initiatives provided support during the pandemic:
- FCS received $14.3 billion in IMF financing.
- An additional $26 billion from last year’s IMF general allocation of special drawing rights.
- New and existing IMF instruments:
- Resilience and Sustainability Trust to provide longer-term affordable financing to address structural challenges such as those brought about by climate change; potential additional source for eligible FCS.
- Food Shock Window approved by the IMF’s Executive Board in September to help countries faced with food cost-related balance of payment problems.
- IMF policy advice, capacity development assistance, and financial support are coordinated with international partners.
Priority 3 — Treating fragility as a global public good
- Fragility evolves and can affect middle-income countries via spillovers from neighboring conflicts.
- Scaled-up international support is critical for countries providing a global public good by hosting refugees and absorbing spillovers.
- Multilateral development banks have expanded assistance, including concessional financing to middle-income countries affected by spillovers, with examples cited including Colombia, Ecuador, Jordan, Lebanon, and Moldova.
- The international community must join forces to manage interconnected risks and strengthen its social contract with the most vulnerable countries.
Source: Countries Hurt by War and Fragility Need Strong Global Partnerships, Resources (IMF blog, December 22, 2022).
References
- Fragile and conflict-affected states
- global public good
- projected
- Consumer prices have increased
- make policy decisions
- Strategy for Fragile and Conflict-Affected States
- Mozambique
- Somalia
- Heavily Indebted Poor Countries Initiative
- Yemen
- special drawing rights
- Food Shock Window
- coordinated with our international partners