## How To Escape The Perils of Fragility

_IMF Blog, August 3, 2021_

## Source details

**Canonical URL:** [How To Escape The Perils of Fragility](https://www.imf.org/en/blogs/articles/2021/08/03/how-to-escape-the-perils-of-fragility)

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- [Markdown version](/en/blogs/articles/2021/08/03/how-to-escape-the-perils-of-fragility/index.md)
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## Bibliographic details
- Authors: Olusegun Akanbi, Kenji Moriyama, Keyra Primus
- Published: August 3, 2021

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### Overview
- Authors: Olusegun Akanbi, Kenji Moriyama, Keyra Primus
- Publication date: August 3, 2021
- Subject: Fragile and conflict states—currently about 40 countries—facing cycles of low administrative capacity, political instability, conflict, and weak economic performance.
- Dataset analyzed: 196 countries between 1979 and 2018.
- Empirical tools referenced: staff working paper and two charts measuring changes in probabilities of entry into/exit from fragility.

### Key empirical findings
- Growth shocks and government effectiveness
  - A decline in growth of 2 percentage points increases the probability of entering fragility, with a substantially larger impact for countries in the middle-range of government effectiveness.
  - The effect of a 2 percentage point growth decline on the probability of exit from fragility is less pronounced.
  - Improving government effectiveness from a low level has a more uniform (less bell-shaped) impact across growth rates, helping prevent entry into fragility at a wide range of growth rates.
- Social spending and exit success
  - Countries that successfully exit fragility spend more on health and education than those that do not escape.
  - These patterns suggest a possible virtuous cycle: protecting social spending → enhanced political and social inclusion → pressure to improve government effectiveness (fiscal, legal, civil service capacities) → stronger economic foundation.
- Pivotal moments
  - Countries that experience a pivotal moment (a critical juncture such as after a crisis or a change of leadership) are more likely to:
    - Exit from fragility,
    - Implement critical reforms to strengthen institutions and policy frameworks,
    - Enjoy more economic resilience after exit.
- Case examples
  - Uganda: Improved political stability enabled reforms to strengthen economic institutions and policies, helping build resilience and increase social inclusion (some progress reversed after 2017).
  - Rwanda: After regaining political stability in the early 2000s, reform efforts backed by international support helped improve resilience, governance and institutions, and social inclusion.

### Policy implications and recommendations
- Counter-cyclical macroeconomic policy
  - Near-fragile countries need to implement counter-cyclical policies—such as a fiscal stimulus—to prevent sharp contractions in economic output when growth weakens.
  - External financing from international partners can support counter-cyclical policies.
- Strengthen macroeconomic and governance frameworks
  - Sound macroeconomic policies should be supported by strong governance and anti-corruption measures to ensure proper use of resources and maintain a stable economy.
- Institutional and inclusion reforms
  - Improve institutions and enhance political and social inclusion through measures such as:
    - Fewer barriers to political participation,
    - Expanded access to legal systems,
    - Less corruption and discrimination in government agencies,
    - Protection of social spending.
- Seize pivotal moments
  - Governments and international partners should recognize and support pivotal moments to implement critical reforms that can trigger durable exits from fragility.

### Interpretations and mechanisms
- Vulnerability profile
  - Countries in the middle-range of government effectiveness are particularly vulnerable to growth slowdowns, implying targeted policy attention is needed for this group.
- Virtuous cycle hypothesis
  - Protecting social spending can initiate a reinforcing process that strengthens inclusion, government effectiveness, and ultimately economic resilience.
- Reform sequencing and support
  - Institutional strengthening and social inclusion are mutually reinforcing and benefit from international support, especially during windows of opportunity.

*Source: IMF Blog post “How To Escape The Perils of Fragility,” August 3, 2021.*

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## References

- [new IMF staff working paper](https://www.imf.org/en/Publications/WP/Issues/2021/05/06/Avoid-a-Fall-or-Fly-Again-Turning-Points-of-State-Fragility-50242)

_Source: https://www.imf.org/en/blogs/articles/2021/08/03/how-to-escape-the-perils-of-fragility_