Low-income countries face multiple economic challenges—including rapid inflation, food insecurity, costly borrowing, and mounting debt—heightened by shocks from the pandemic and Russia’s war in Ukraine.
As a result, the IMF has revised down its growth projections for low-income countries, where per capita income growth is falling further behind the rates needed to catch up with advanced economies. This threatens to reverse a decades-long trend of steadily converging living standards.
To boost economic growth and put them back on a path to income convergence with advanced economies, we estimate that low-income countries need an additional $440 billion of financing through 2026 from all available sources. As part of this, IMF concessional financing offered at low or zero interest rates will play a key role in helping these countries cushion the impact on growth from ongoing shocks and future crises.
As the Chart of the Week shows, the benefits of such financing were visible during the pandemic, when IMF-funded economies, on average, saw stronger, faster recoveries than unfunded counterparts, based on readings across three indexes tracking economic activity. Two of these are nontraditional metrics: Google Mobility Reports, drawn from smartphone location data, and nighttime satellite imagery, obtained from the Earth Observation Group. The third combines conventional economic indicators like gross domestic product, industrial production, and tourist visits.
