Low-Income Countries

Rising to the Challenge | World Bank Group-IMF Joint Event

Wednesday, April 3, 2024
09:00 am-12:00 pm ET / 13:00-16:00 GMT



 

As the global economic conditions begin to normalize after years marked by COVID-19, a global food crisis, surging inflation, and high interest rates, low-income countries—which suffered the most from these shocks—are at an important juncture.

How can low-income countries overcome their current challenges? What are the potential opportunities on the horizon?

Join Kristalina Georgieva and Ajay Banga for a live discussion on what low-income countries can do to foster macroeconomic stability, promote sustainable and inclusive growth, and unlock progress toward the sustainable development goals.

Also hear from senior policy makers and experts on what role the international community can play to support these countries—from mobilizing financing and calibrating their support through strengthening debt resolution frameworks.

For more details, see AGENDA.

Read our latest report on Macroeconomic Developments and Prospects for Low-Income Countries.

SPEAKERS
Kristalina Georgieva, Managing Director, International Monetary Fund
Kristalina Georgieva
Managing Director, International Monetary Fund
Antoinette Monsio Sayeh, Deputy Managing Director, IMF
Antoinette Monsio Sayeh
Deputy Managing Director, IMF
Vera Esperança Dos Santos Daves De Sousa,Finance Minister, Angola
Vera Esperança Dos Santos Daves De Sousa
Finance Minister, Angola
Andrew Mitchell, Minister of State (Development and Africa), United Kingdom
Andrew Mitchell
Minister of State (Development and Africa), United Kingdom
Hanan Morsy, Deputy Executive Secretary (Programme) and Chief Economist, United Nations Economic Commission for Africa
Hanan Morsy
Deputy Executive Secretary and Chief Economist, United Nations Economic Commission for Africa
Ajay Banga, President, World Bank Group
Ajay Banga
President, World Bank Group
Njuguna S. Ndungu, Cabinet Secretary, National Treasury & Economic Planning, Kenya
Njuguna S. Ndungu
Cabinet Secretary, National Treasury & Economic Planning, Kenya
Tatiana Rosito, Secretary of International Affairs, Ministry of Finance of Brazil
Tatiana Rosito
Secretary of International Affairs, Ministry of Finance of Brazil
Liao Min, Vice Minister of Finance of China
Liao Min
Vice Minister of Finance of China
Anna Bjerde, Managing Director of Operations, The World Bank
Anna Bjerde
Managing Director of Operations, The World Bank
Romuald Wadagni, Minister of Economy and Finance, Senior Minister of State, Benin, World Bank Governor
Romuald Wadagni
Minister of Economy and Finance, Senior Minister of State, Benin, World Bank Governor
Riccardo Barbieri Hermitte, Director General of the Treasury, Ministry of Economy and Finance of Italy
Riccardo Barbieri Hermitte
Director General, Treasury, Ministry of Economy & Finance, Italy
Abdulmuhsen AlKhalaf, Assistant Minister of Finance of Saudi Arabia
Abdulmuhsen AlKhalaf
Assistant Minister of Finance of Saudi Arabia

MODERATORS
Masood Ahmed, President, Center for Global Development
Masood Ahmed
President, Center for Global Development
Shanta Devarajan, Professor of the Practice of International Development, Georgetown University
Shanta Devarajan
Professor of the Practice of International Development, Georgetown University
Rachelle Akuffo, Anchor, Yahoo Finance
Rachelle Akuffo
Anchor, Yahoo Finance


Support for LICs

Blogs

How Europe Can Make Carbon Pricing Policies Less Regressive
September 26, 2024

Easing the burden on lower-income households is not only socially fair, but also economically efficient

A Low-Growth World Is an Unequal, Unstable World
July 23, 2024

Long periods of slow economic growth can cause a jump in inequality. But a balanced set of policies can stave off that outcome.

Mapping the World's Readiness for Artificial Intelligence Shows Prospects Diverge
June 25, 2024

New AI Preparedness Index Dashboard tracks 174 economies based on their digital infrastructure, human capital, labor policies, innovation, integration and regulation

Scars of Conflict Are Deeper and Longer Lasting in Middle East and Central Asia
June 5, 2024

The negative economic effects of conflicts are larger and more persistent, partly reflecting a sharper impact of higher-intensity conflicts in these regions.

AI Will Transform the Global Economy. Let’s Make Sure It Benefits Humanity.
January 14, 2024

AI will affect almost 40 percent of jobs around the world, replacing some and complementing others. We need a careful balance of policies to tap its potential

Harm From ‘De-Risking’ Strategies Would Reverberate Beyond China
October 17, 2023

The negative impact of ‘de-risking’ strategies by major economies would be felt beyond China, while comprehensive reforms in China could generate significant positive spillovers

Policy Papers

2024 Review Of The Poverty Reduction And Growth Trust Facilities And Financing — Reform Proposals
October 21, 2024

This paper reviews Poverty Reduction and Growth Trust (PRGT) facilities and financing. It proposes a comprehensive package of lending policy reforms and financing measures that aims to bolster the Fund’s capacity to support Low-Income Countries (LICs) in addressing their balance of payment needs, while restoring the self-sustainability of the Trust. The Review proposes a long-term self-sustained annual PRGT lending envelope of SDR 2.7 billion, more than double the PRGT envelope before the Covid-19 pandemic, consistent with the expected demand for Fund’s concessional financial support in the years ahead. The paper also proposes to introduce a new interest rate mechanism to better reflect the heterogeneity among LICs and focus further concessional resources to the poorest countries. These countries (currently 31 LICs) will continue to benefit from an interest-free lending under the PRGT, while other LICs will be charged a modest, and still concessional, interest rate. Additionally, the paper proposes to keep PRGT access limits at their current levels and to implement several reforms, including: reverting the PRGT access norm to the level prevailing before December 2023, streamlining and strengthening the PRGT safeguards, adjusting the PRGT eligibility and graduation framework and updating the list of PRGT-eligible countries, extending the temporarily higher cumulative access limits under the RCF until the end of December 2025, and implementing a targeted adjustment to the Policy Safeguards for High Combined Credit Exposure. On financing measures, the paper proposes to address the remaining gap in PRGT subsidy resources after accounting for the lending policy changes through (1) a further five-year suspension of PRGT administrative expenses reimbursement to the GRA and (2) a framework to deploy IMF internal resources to facilitate the generation of PRGT subsidy resources.

Review Of Charges And The Surcharge Policy—Reform Proposals
October 21, 2024

On October 11, 2024, the IMF’s Executive Board concluded the Review of Charges and the Surcharge Policy. The review is part of a broader ongoing effort to ensure that the IMF’s lending policies remain fit for purpose to meet the evolving needs of the membership. Charges and surcharges are important elements of the IMF’s cooperative lending and risk-management framework, where all members contribute and all can benefit from support when needed. Together, they cover lending intermediation expenses, help accumulate reserves to protect against financial risks, and provide incentives for prudent and temporary borrowing. This provides a strong financial foundation that allows the IMF to extend vital balance of payments support on affordable terms to member countries when they need it most.

Against the backdrop of a challenging economic environment and high global interest rates, the Executive Board reached consensus on a comprehensive package of reforms that substantially reduces the cost of borrowing for members while safeguarding the IMF's financial capacity to support countries in need. The approved measures will lower IMF borrowing costs by about US$1.2 billion annually or reduce payments on the margin of the rate of charge as well as surcharges on average by 36 percent. The number of countries subject to surcharges in fiscal year 2026 is expected to fall from 20 to 13.

Key reforms include a reduction in the margin for the rate of charge, an increase in the threshold for level-based surcharges, a reduction in rate for time-based surcharges, an alignment of thresholds for commitment fees with annual and cumulative access limits for GRA lending facilities, and institution of regular reviews of surcharges.

The series of three papers informed the Executive Board’s first and second informal engagements (July and September 2024) and the formal meeting (October 2024) on this review.

Initial Considerations For The Review Of Charges And The Surcharge Policy
October 21, 2024

On October 11, 2024, the IMF’s Executive Board concluded the Review of Charges and the Surcharge Policy. The review is part of a broader ongoing effort to ensure that the IMF’s lending policies remain fit for purpose to meet the evolving needs of the membership. Charges and surcharges are important elements of the IMF’s cooperative lending and risk-management framework, where all members contribute and all can benefit from support when needed. Together, they cover lending intermediation expenses, help accumulate reserves to protect against financial risks, and provide incentives for prudent and temporary borrowing. This provides a strong financial foundation that allows the IMF to extend vital balance of payments support on affordable terms to member countries when they need it most.

Against the backdrop of a challenging economic environment and high global interest rates, the Executive Board reached consensus on a comprehensive package of reforms that substantially reduces the cost of borrowing for members while safeguarding the IMF's financial capacity to support countries in need. The approved measures will lower IMF borrowing costs by about US$1.2 billion annually or reduce payments on the margin of the rate of charge as well as surcharges on average by 36 percent. The number of countries subject to surcharges in fiscal year 2026 is expected to fall from 20 to 13.

Key reforms include a reduction in the margin for the rate of charge, an increase in the threshold for level-based surcharges, a reduction in rate for time-based surcharges, an alignment of thresholds for commitment fees with annual and cumulative access limits for GRA lending facilities, and institution of regular reviews of surcharges.

The series of three papers informed the Executive Board’s first and second informal engagements (July and September 2024) and the formal meeting (October 2024) on this review.

Review Of Charges And The Surcharge Policy— A Possible Reform Package
October 21, 2024

On October 11, 2024, the IMF’s Executive Board concluded the Review of Charges and the Surcharge Policy. The review is part of a broader ongoing effort to ensure that the IMF’s lending policies remain fit for purpose to meet the evolving needs of the membership. Charges and surcharges are important elements of the IMF’s cooperative lending and risk-management framework, where all members contribute and all can benefit from support when needed. Together, they cover lending intermediation expenses, help accumulate reserves to protect against financial risks, and provide incentives for prudent and temporary borrowing. This provides a strong financial foundation that allows the IMF to extend vital balance of payments support on affordable terms to member countries when they need it most.

Against the backdrop of a challenging economic environment and high global interest rates, the Executive Board reached consensus on a comprehensive package of reforms that substantially reduces the cost of borrowing for members while safeguarding the IMF's financial capacity to support countries in need. The approved measures will lower IMF borrowing costs by about US$1.2 billion annually or reduce payments on the margin of the rate of charge as well as surcharges on average by 36 percent. The number of countries subject to surcharges in fiscal year 2026 is expected to fall from 20 to 13.

Key reforms include a reduction in the margin for the rate of charge, an increase in the threshold for level-based surcharges, a reduction in rate for time-based surcharges, an alignment of thresholds for commitment fees with annual and cumulative access limits for GRA lending facilities, and institution of regular reviews of surcharges.

The series of three papers informed the Executive Board’s first and second informal engagements (July and September 2024) and the formal meeting (October 2024) on this review.

Review of the Fund’s Income Position for FY 2024 and FY 2025-2026
May 10, 2024

This paper updates the projections of the Fund’s income position for FY 2024 and FY 2025-2026 and proposes related decisions for the current and the following financial years. The paper also includes a proposed decision to keep the margin for the rate of charge unchanged until completion of the review of surcharges, but until no later than end FY 2025, at which time the Board would set the margin for the rest of FY 2025 and FY 2026. The Fund’s overall net income for FY 2024 is projected at about SDR 4.4 billion after taking into account pension-related remeasurement gain and estimated retained investment income of the Endowment Account.

Review of the Adequacy of the Fund’s Precautionary Balances
April 4, 2024

On March 20, 2024, the IMF’s Executive Board reviewed the adequacy of the Fund’s precautionary balances. The review took place somewhat ahead of the standard two-year cycle, in view of the imminent attainment of the current indicative medium-term indicative target of SDR 25 billion for the first time. Precautionary balances comprise the Fund’s general and special reserves. They are a key element of the IMF’s multi-layered framework for managing financial risks. Precautionary balances provide a buffer to protect the Fund against potential losses, resulting from credit, income, and other financial risks. The review was based on the assessment framework established in 2010, which uses an indicative range for precautionary balances, linked to a forward-looking measure of total IMF non-concessional credit, to guide decisions on adjusting the medium-term target over time. While financial risks remain high, they are broadly unchanged from the last review, taking into account the further accumulation of reserves and strengthening of some risk mitigants. Against this background, Executive Directors broadly supported staff’s proposal to retain the current medium-term target of SDR 25 billion and increase the minimum floor from SDR 15 billion to SDR 20 billion. The Board also supported maintaining the biennial review cycle, with earlier reviews if warranted by developments that could materially affect the adequacy of precautionary balances.

Research & Publications

Global Shocks Unfolding: Lessons from Fragile and Conflict-affected States
October 4, 2024

This paper investigates the consequences of global shocks on a sample of low- and lower-middle-income countries with a particular focus on fragile and conflict-affected states (FCS). FCS are a group of countries that display institutional weakness and/or are negatively affected by active conflict, thereby facing challenges in macroeconomic policy management. Examining different global shocks associated with commodity prices, external demand, and financing conditions, this paper establishes that FCS economies are more vulnerable to these shocks compared to non-FCS peers. The higher sensitivity of FCS economies is mainly driven by procyclical fiscal responses, aggravated by the lack of effective spending controls and timely access to financial sources. External financing serves as a source of stability, partially mitigating the adverse impact of global shocks. This paper contributes to a better understanding of how conditions of fragility, which are on the rise in many parts of the world today, can amplify the effects of negative exogenous shocks. Its results highlight the diverse nature of underlying sources of vulnerabilities, spanning from fiscal and external buffers to institutional quality and economic structure, with lessons applicable to a broader set of countries. Efficient and timely external financial support from external partners, including international financial institutions, should help countries’ counter-cyclical responses to mitigate adverse shocks and achieve macroeconomic stability.

Transfers, Excess Savings, and Large Fiscal Multipliers
September 27, 2024

This paper seeks to show that a New Keynesian model can produce highly persistent and large output responses to fiscal transfers and excess wealth, in line with recent empirical literature. The introduction of myopia to households to allow realistic degrees of dissaving from wealth and accumulated transfers, alongside more standard Keynesian features, achieves this goal. Model IRFs closely match the high fiscal multipliers from the tax stimulus SVAR literature, and also have important inflationary consequences. An application of this model to the COVID era, where transfer payments in the United States supported an accumulation of ``excess savings", results in inflation rising by over 1 percentage point for several years as well as a persistent increase in output over the same horizon. Finally, under the same framework and calibration, it is found that high debt and a weak fiscal rule can dull the transmission of monetary policy due to the wealth effect from higher interest payments.

How do Economic Growth and Food Inflation Affect Food Insecurity?
September 6, 2024

During the global recession of 2020 food insecurity increased substantially in many countries around the world. Fortunately, the surge in food insecurity quickly came to a halt as the world economy returned to its positive growth path, despite double-digit domestic food inflation in most countries. To shed light on the relative importance of income growth and food inflation in driving food insecurity, we employ a heterogeneous-agent model with income inequality, complemented by novel cross-country data for the period 2001-2021. We use external instruments (changes in commodity terms-of-trade, external economic growth, and harvest shocks) to isolate exogenous variation in domestic income growth and ood inflation. Our findings suggest that income growth is the dominant driver of annual variations in food insecurity, while food price inflation plays a somewhat smaller role, aligning with our model predictions.

The Joint Effect of Emigration and Remittances on Economic Growth and Labor Force Participation in Latin America and the Caribbean
August 9, 2024

We provide a consistent empirical framework to estimate the net joint effect of emigration and remittances on the migrants’ countries of origin key economic variables (GDP growth and labor force participation), while addressing the endogeneity concerns using novel “shift-share” instrumental variables in the spirit of Anelli and others (2023). Understanding this joint impact is crucial for the Latin America and the Caribbean region that has seen a continuous growth in remittances over the past decades, due to steady emigration, and where remittances represent the largest capital inflows for many countries now. Focusing on the past two decades (1999-2019), this study finds that on average emigration has a negative and statistically significant impact on contemporaneous economic growth and change in labor force participation in the countries of origin across LAC, while remittances partially mitigate this adverse impact—especially on economic growth—resulting in a small negative net joint effect. There are significant differences across subregions for all estimates, with the largest negative effects observed in the Caribbean. In addition, the negative impact of emigration and remittances on the change in labor participation is small, but for the youngest cohort (15-24) is twice as large as for the overall labor force participation. The results are robust to various specifications, variables, and measurements of emigration and remittances.

Understanding Barriers to Financial Access: Insights from Bank Pricing Data
July 12, 2024

Greater availability of financial access related data in recent years is increasingly enabling policymakers to better track and monitor financial access trends and developments. However, data on barriers to financial access, including costs associated with using financial services—a key factor of financial exclusion—remain scarce. To gain insight into the costs of financial access faced by the low-income segments of population, this paper presents an analysis of a novel dataset on bank pricing containing information on fees and charges associated with various banking services—collected as part of the United Nations Capital Development Fund’s (UNCDF) Making Access Possible (MAP) program—based on a market research approach for 34 low- and middle-income countries in the ASEAN, SADC, and WAEMU regions. The results of our affordability analysis reveal that the costs of maintaining a bank checking account and conducting a few basic transactions can exceed 5 percent of monthly income for consumers in more than 10 percent of the countries in the sample, mainly in the WAEMU and SADC regions. These findings underscore the considerable challenge of affordability as a significant barrier to access to financial services, especially for low-income households and SMEs. The analysis also highlights the need to collect more granular data on the affordability aspect of financial access to facilitate more effective policymaking.

Distributional Impacts of Heterogenous Carbon Prices in the EU
July 12, 2024

We analyse the consequences of carbon price heterogeneity on households in The EU from 2010 to 2020. Accounting for both heterogeneity in carbon pricing across emission sources and the indirect effects from inter-industry linkages, we obtain two key findings. First, due to widespread carbon pricing exemptions, household burdens are lower than previously estimated. Second, lower-income groups are affected disproportionately, because they spend a smaller share of their expenditure on products that benefit from exemptions than their higher-income counterparts. Therefore, imposing uniform carbon prices both within and across countries would reduce carbon pricing regressivity on household expenditure in the EU. A global price would be most effective in this regard, as it would raise carbon prices embodied in EU imports. Further, because EU economies are open and apply higher average carbon prices than their trade partners, the domestic revenues exceed the costs embodied in EU household consumptions bundles. This increases the scope for reducing the burden of carbon pricing on lower-income households through revenue redistribution. Our results imply that the ongoing extension of carbon pricing to more sectors through the EU ETS II and the introduction of the EU’s CBAM should make carbon pricing less regressive, all else equal.

Videos

Promoting Climate-Resilient and Green Development in Africa | Africa Perspectives
February 7, 2023

A conversation on how sub-Saharan Africa can promote climate-resilient and green development. African Department director Abebe Aemro Selassie hosts the premiere episode of Africa Perspectives.

Zambia: Towards a More Resilient and Inclusive Future
February 1, 2023

A discussion with University of Zambia students on how Zambia is making progress in its reform efforts to restore sustainability, invest in youth, combat corruption, and attract investment and the role of the IMF.

Strengthening Institutions for Sustainable Growth in the Post-COVID World
January 6, 2023

The conference provides an opportunity to discuss how South Asia can build on its development success in the aftermath of the COVID-19 pandemic and geopolitical tensions to achieve its potential.

The Resilience and Sustainability Trust - A Dialogue with Countries
December 13, 2022

A discussion on how the Resilience and Sustainability Trust fits wider climate objectives at the country and global level.

Regional Economic Outlook for the Middle East and North Africa, October 2022
November 2, 2022

Jihad Azour, Director of the Middle East and Central Asia Department, presents the IMF’s latest economic outlook and growth projections for the MENA region

Living on the Edge: IMF Outlook for sub-Saharan Africa Nairobi Launch
November 1, 2022

A presentation and discussion of the October 2022 Regional Economic Outlook for Sub-Saharan Africa.

Seminars

Seminars
The Infrastructure Seminar series provides a forum for leading experts to share latest insights on key policy issues related to public infrastructure.
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Developing Economies Seminars

Developing Economies Seminars
A flagship seminar at the Fund, the Developing Economies Seminar Series focuses on topical policy issues for developing countries.
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FCDO/IMF Project

FCDO/IMF Project
The IMF has partnered with the UK's Foreign, Commonwealth and Development Office (FCDO) to study critical macroeconomic policy issues in low-income countries to promote sustainable and inclusive growth in low-income countries.
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