Low-Income Countries
The IMF has acted with unprecedented speed and scale to support low-income countries during the pandemic. The Fund provided financial support to 53 of 69 eligible low-income countries in 2020 and in the first half of 2021, with about US$14 billion disbursed as zero percent interest rate loans from the Poverty Reduction and Growth Trust.
Most of this support was through the Fund’s emergency financing instruments—the Rapid Credit Facility (RCF) and Rapid Financing Instrument (RFI)—which provide immediate, one-time disbursements to countries facing urgent balance of payments needs. The Fund was able to respond to a record number of requests for financial assistance through a series of temporary access limit increases to the RCF and RFI, and temporary increases in the Poverty Reduction and Growth Trust (PRGT) overall access limits.
IMF Staff Reaches Staff Level Agreement with Armenia on the First Review of the Stand-By Arrangement
The global economy has been tested by repeated shocks over the past few years from wars and conflicts, including the new one in the Middle East. In addition to its humanitarian impacts, the economic effect is global, and it will once again hit the poorest and most vulnerable the hardest. This comes at a time when policy space has eroded and international cooperation is weaker. The appropriate policy response depends on how the shock propagates through the domestic economy, calling for timely and adaptable policies backed by credible frameworks and international cooperation. Ending wars and conflicts and securing lasting peace around the world remains essential for sustainable growth and long-term stability.
Washington, DC – April 16, 2026: Guided by the views of International Monetary Fund (IMF) members representing a majority of the IMF’s total voting power, and consistent with long standing practice, the Managing Director Kristalina Georgieva today announced that the IMF is now dealing with the Government of Venezuela, under the administration of acting President Delcy Rodríguez.
IMF Management Approves a Staff Monitored Program for Zimbabwe
In this speech launching the IMF’s April 2026 Regional Economic Outlook for the Middle East and Central Asia, Jihad Azour, Director of the Middle East and Central Asia Department, highlights how the outbreak of war has delivered a severe and multifaceted shock to one of the world’s most strategically important economic corridors, disrupting three pillars of stability: energy markets, trade routes, and business confidence. Given the extraordinary uncertainty surrounding the conflict’s duration and intensity, the analysis presents a reference scenario alongside adverse alternatives to help frame the risks.
In this speech launching the IMF’s April 2026 Regional Economic Outlook for Sub‑Saharan Africa, Director of the African Department Abebe Selassie notes that a strong, reform‑driven rebound in 2025 is now under strain from the war in the Middle East and a sharp, likely structural, decline in foreign aid. The core message is how policymakers can safeguard hard‑won stabilization gains while navigating new shocks and building the basis for resilient, inclusive growth.
Impact on economic activity will vary across countries, but inflation will rise for all
The region must respond to energy shocks through disciplined policies that protect the vulnerable and strengthen resilience
The region can best cope by protecting vulnerable people, letting prices adjust, anchoring inflation expectations, and accelerating structural reforms
Middle East conflict intensifies global uncertainty at a time of strained public finances, underscoring the need for policies that preserve future stability
Markets have been broadly orderly so far—but financial stability risks are elevated
The Middle East conflict halted growth momentum. The right policies and stronger global cooperation are needed to contain the damage.
Since the 2025 Annual Meetings, the Independent Evaluation Office (IEO) completed its evaluation on IMF Advice on Fiscal Policy and announced plans to launch evaluations of “IMF Advice on Monetary Policy” and “Political Economy Considerations in IMF Work.” The IEO is also progressing on its ongoing evaluations of “The IMF and Climate Change” and “IMF Engagement on Debt Issues in Low-Income Countries.”
The world faces the spillovers of a new war. In addition to the human toll, the economic effects of the war in the Middle East are global, and will once again hit the poorest and most vulnerable countries the hardest. This comes at a time when policy space has eroded and international cooperation is weaker. The appropriate policy response depends on how the shock propagates through the domestic economy, calling for pragmatism and agility, backed by credible policy frameworks. The IMF stands ready to deploy all its tools to assist the membership. We will support good policymaking—advising also that this new test must not derail essential medium-term priorities—and provide balance of payments financing where needed.
On March 20, 2026 the Executive Board of the International Monetary Fund (IMF) concluded the 2026 Review of the Adequacy of the Fund’s Precautionary Balances. This review took place on the standard two-year cycle, following the 2024 Review. An interim assessment of precautionary balances was conducted within the Review of the Fund’s Income Position for FY2025 and FY2026, concluded in April 2025 (2025 Update). 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. In conducting the review, the Executive Board applied the rules-based framework agreed in 2010 and reaffirmed in 2024. Precautionary balances have continued to increase since reaching the SDR 25 billion medium-term target at the end of FY2024. The overall balance of risks and risk mitigants to the Fund remain broadly unchanged since the 2025 Update. Precautionary balances are expected to remain above the target, including assuming additional distributions to the Interim Placement Administered Account (IPAA) in coming years. Against this background, Executive Directors endorsed staff’s proposal to retain the current medium-term target of SDR 25 billion and the minimum floor of SDR 20 billion.
Against the backdrop of persistent and recently widening global imbalances, the paper presents a structured framework for understanding how domestic policies can influence current account positions by altering domestic saving and investment decisions. Staff analysis finds that traditional macroeconomic policies remain the dominant drivers of imbalances, but certain types of industrial policies could also play a role. Micro industrial policies—those targeting specific sectors or firms—generally have ambiguous and limited effects on the current account depending on their impact on aggregate productivity. Macro industrial policies—those deployed economy-wide and often paired with restrictions such as capital flow management measures—can materially affect the current account but come at a cost to consumption. Trade restrictions, often deployed to counter imbalances, would only meaningfully alter current account balances when used temporarily or to support higher public savings. Using scenario analysis, the paper shows how domestic rebalancing, undertaken simultaneously, across deficit and surplus economies yields both a reduction in global imbalances and higher global output. The report concludes that the future path of global imbalances will be largely shaped by domestic macroeconomic trajectories. Durable rebalancing is a collective endeavor: it requires sound domestic policy action across major economies and works best when countries move together. To help design such policies, the Fund is pursuing a multipronged approach by strengthening data, analysis, surveillance and dialogue across the member countries.
Low-income countries (LICs) are navigating a highly uncertain global environment shaped by shifting policies in major economies. Changes in trade, migration, spending priorities, and foreign aid are affecting LICs directly and indirectly. While lower food and energy prices and a weaker dollar have provided some relief, cuts in official development assistance are already weighing on many LICs, and tighter immigration policies could weaken remittance inflows going forward. Macroeconomic outcomes also remain highly divergent: growth is projected to rise from 4.8 percent in 2025 to 5.3 percent in 2026, but many LICs still face weak per capita income growth, high debt service burdens, thin reserve buffers, and tighter financing conditions. Building resilience and reinvigorating growth remain urgent. This agenda calls for continued fiscal consolidation in most LICs, with pace and calibration tailored to country circumstances, and supported by stronger domestic revenue mobilization, expenditure prioritization, and improvements in public financial and debt management. Monetary and exchange rate policies must remain focused on durably restoring price stability while safeguarding financial stability. At the same time, structural reforms to strengthen governance, improve institutional quality, and support private sector-led growth and job creation will be critical to rebuilding buffers and raising productivity. The paper also emphasizes that stronger macro-fiscal management and fiscal institutions can help attract more and higher-quality foreign direct investment by reducing policy uncertainty and improving investors’ risk-adjusted returns. By contrast, fiscal incentives should be used selectively and only where fiscal discipline and institutional capacity are already strong. International support, including concessional financing, capacity development, and IMF engagement, will remain critical, with scarce concessional resources best prioritized toward the poorest and fragile LICs.
This paper provides an update of the resource adequacy of the Fund’s concessional financing trusts. Poverty Reduction and Growth Trust (PRGT) finances remain adequate, broadly in line with expectations at the completion of the 2024 PRGT Facilities and Financing Review and the 2025 adequacy update. The lending outlook is largely unchanged, with projected additional demand in 2026-27 expected to offset lower-than-anticipated new loan commitments in 2025. While progress has been made in securing assurances from members under the framework to distribute GRA resources to facilitate the generation of additional PRGT subsidy resources, broader support is essential to reach the 90-percent threshold. On the Resilience and Sustainability Trust (RST), based on updated projections, there are sufficient resources to meet the demand pipeline at least through 2028. The RST’s reserves remain adequate and the interest rate cap for Group A countries remains appropriate, though risks have increased. The Catastrophe Containment and Relief Trust (CCRT) remains underfunded and its next comprehensive review provides an opportunity to address its financing challenges. The Heavily Indebted Poor Countries (HIPC) initiative is nearly complete, although Sudan’s progress towards the Completion Point continues to be delayed. Staff assesses that risks to the finances of the PRGT and RST are appropriately mitigated. Based on its assessment of the trusts, and pending the outcome of the planned CCRT Review and amid ongoing efforts to secure PRGT assurances, staff does not propose any adjustments or policy changes pertaining to the Fund’s concessional financing trusts.
This paper quantifies the effects of increases in military expenditures on education and health spending using local projections and different strategies to identify exogenous changes in military spending based on data for 33 sub-Saharan African (SSA) economies over the period 1990-2023. Specifications with shocks identified through military spending surges and through a fiscal reaction function yield mixed results that typically are neither economically nor statistically significant. But instrumental variables estimates that tackle endogeneity concerns indicate that a one-standard-deviation increase in the share of military spending in total government expenditure reduces the shares of education and health spending by about 1 percentage point over the medium-term. The crowding-out effects tend to materialize sooner for health expenditures, likely because they have a larger discretionary component, while education spending is marked by rigidities. In addition, we find that military spending shocks tend to crowd-out health expenditures when access to international aid is limited, while there is no evidence of crowding-out when aid is relatively amply available. In contrast, it appears that overall debt levels and the state of the business cycle are not significant factors in determining the extent of crowding-out effects of military expenditure.
Understanding how policies can stabilize household welfare during recessions requires a framework that captures household heterogeneity, unemployment risk, and general-equilibrium labor market dynamics. We study a contractionary demand shock in a Heterogeneous-Agent New-Keynesian model with search-and-matching friction on the labor market (HANK–SAM) and compare the effectiveness of alternative income-stabilization policies. Using a common fiscal envelope, we contrast increases in unemployment insurance generosity, with targeted transfers to hand-to-mouth households, and universal transfers. Policy effectiveness is assessed through the aggregate consumers’ welfare, measured in consumption-equivalent variation units. In an economy calibrated to U.S. data, unemployment insurance yields the largest welfare gain per percentage point of fiscal cost, followed by targeted transfers, while universal transfers are the least effective. A temporary increase in unemployment insurance generates the highest welfare, as it combines immediate cash-flow support with insurance effects, disproportionally benefiting households with high marginal propensities to consume.
In this paper, we develop two complementary approaches for benchmarking the public debt trajectories of Low-Income Countries (LICs) to assess their dynamic stability. We compare the evolution of the overall public debt-to-GDP ratios of reference LICs with the historical experiences of other countries with similar characteristics, which are now further down the path of economic development and have not experienced public debt stress events. We rely on both direct comparison and a novel application of the synthetic control method (SCM). These public debt trajectories that are dynamically stable from a historical perspective can provide insights into debt sustainability analyses for LICs.
Determining the appropriate size of government remains central for fiscal sustainability, social protection, and macroeconomic stability. Wagner’s law, formulated in the 19th century, posits that government expenditures rise with income, yet contemporary evidence is mixed. This paper revisits the relationship between economic growth and government spending in Europe over the period 1990–2024, with particular attention to the Balkans. Using an instrumental variable strategy based on trade-weighted partner growth, we find no evidence that rising income systematically expands government expenditure. On the contrary, faster growth is associated with modest declines in expenditure, particularly for current spending, while capital outlays remain largely unaffected. These patterns are stronger in high-debt countries, suggesting that fiscal rules and debt constraints increasingly shape spending decisions. The Balkan economies largely follow these trends, though heterogeneity reflects transition dynamics and EU integration. Our findings imply that Wagner’s law no longer describes spending behavior in modern European economies. Policymakers should focus less on income-driven expenditure growth and more on strengthening fiscal frameworks, improving spending efficiency, and prioritizing high-return investments in infrastructure and human capital. These measures can enhance fiscal resilience while supporting public service provision and long-term development goals.
This paper evaluates the impact of Costa Rica’s adoption of SUPRES, a digital treasury platform that centralizes and automates cash transfer payments for social assistance programs. While most GovTech literature has focused on service delivery improvements, the effects of digitalization on treasury operations remain largely unexplored. Addressing this gap, we provide an empirical assessment of how GovTech reforms support treasury efficiency by improving cash management and reducing opportunity costs of borrowing for treasury. Using administrative data and survey evidence, this analysis finds that average lead times for the analyzed social cash programs fell with the adoption of SUPRES - from 9–13 days before the reform to 2-3 days after-, generating estimated opportunity cost savings for the Treasury exceeding USD 4 million, at a relatively low implementation cost, highlighting the strong value-for-money of this reform. In 2020, the pre-SUPRES opportunity cost was about 1.1% of total domestic short-term interest payments, underscoring the importance of digital treasury reforms for managing liquidity. Although the savings are modest compared to GDP, they are significant for treasury operations, especially during tight cash periods. Survey responses from administrative staff indicate enhanced operational efficiency, transparency, and inter-institutional coordination following SUPRES adoption. Beyond treasury efficiency gains, the reform also strengthens targeting, expands financial inclusion, and supports the diversification and resilience of the social payments ecosystem by enabling a multi‑bank payment model. Overall, the analysis shows how relatively low‑cost digital treasury reforms can deliver meaningful efficiency gains in cash management while generating broader operational and financial inclusion benefits.
Uncertainty in the foreign value of the US dollar affects the US banking sector and therefore, the US real economy. In this paper, I propose a novel ‘Exchange Rate (ER) Uncertainty Channel’ and show the effects of increased volatility in the trade-weighted US dollar index on the US banking sector. Higher volatility in the exchange rate leads to retrenchment by foreign banks from the US syndicated loans market (SLM). This entails a loanable funds supply bottleneck for US banks trying to finance their loans through syndicates. US banks respond with tighter credit standards in an attempt to re-allocate scarce funds. In response to a 1 standard deviation increase in ER volatility, US banks’ net interest margin increase by 10 bps annualized, whereas balance sheet contract by 2-3 pp annualized. This is consistent with banks exerting market power in the loan market while simultaneously shrinking their balance sheet. Both the price and volume effects are stronger for US banks with greater exposure to the SLM as measured by their loans-to-interest-earning-assets ratio. Thus, volatility in the US dollar is a ‘global risk indicator’ that significantly affects US banking lending activity.
