The Implications of the Global Financial Crisis for Low-Income Countries—An Update

Policy Papers, September 28, 2009

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Low-income countries are being hit hard by the global financial crisis.
They are facing a sharp contraction in export growth, FDI inflows, and remittances, and lower-than-committed aid.
A marked recovery is in prospect for 2010 helped by rising world demand and supported by short-term domestic policies.
Countries are using fiscal and other policies to respond to the crisis and should continue to do so, where appropriate, until the economic recovery is clearly underway.
Risks to debt sustainability are rising and countries should begin preparing to realign policies toward medium-term sustainability once the recovery is clearly on the move.
Additional highly concessional donor support is needed to ensure that countries are not forced to make these adjustments prematurely, and to facilitate a smooth return to a sustainable debt path, with strong growth, over the medium term.

Continue use of fiscal and other domestic policies to support the short-term response to the crisis until recovery is clearly underway.
Prepare to realign policies toward medium-term debt sustainability once recovery momentum is clear.
Secure additional highly concessional donor support to avoid premature adjustment and to facilitate a smooth return to sustainable debt paths with strong medium-term growth.

Immediate risks: sharp contraction in export growth, FDI inflows, and remittances; lower-than-committed aid.
Medium-term concerns: rising risks to debt sustainability that require policy realignment as recovery takes hold.
Positive outlook: marked recovery expected in 2010 driven by rising world demand and supported by short-term domestic policies.

The Implications of the Global Financial Crisis for Low-Income Countries—An Update, (USA: International Monetary Fund, 0) accessed 9/19/2026