How Sound Economic Policy Can Help Prevent Conflict

IMF Blog, March 13, 2025

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New IMF research based on policy simulations incorporating machine learning-based predictions of conflict finds large payoffs from preventive policies.
Every $1 invested in prevention—through policy efforts to promote macroeconomic stability and growth, strengthen institutions, and support local community development—can save between $26 and $103 in possible conflict-related costs, including humanitarian needs and lost economic output.
Benefits from prevention are particularly notable in high-risk countries suffering from recent violence.

Preventive macroeconomic policy can reduce the risk of armed conflict, saving lives and avoiding injuries, forced displacement and migration, and vast damage to the economy.
State-based conflicts rose to their highest level in half a century last year, according to the Uppsala Conflict Data Program; non-state violence is also at a high level.
IMF financial support to countries in need is associated with reductions in the likelihood of violence by 1.5-4.0 percentage points.

Healthier fiscal positions and improved state capacity
- The risk of conflict is reduced when governments collect more than they spend, and use extra money to deliver better services and economic development.
A resilient labor market and resilient economy
- High unemployment increases the likelihood and intensity of violence; employment reduces incentives to pick up arms.
International engagement to improve state capacity
- Macroeconomic support (including IMF financial support) can complement peacebuilding efforts and lower the probability of violence by 1.5-4.0 percentage points.

Invest in prevention through policies that promote macroeconomic stability, growth, strengthened institutions, and local community development to achieve high returns (between $26 and $103 saved per $1 invested).
Prioritize high-risk countries suffering from recent violence where savings from prevention are particularly large.
Develop early warning systems to identify rising social tensions and risks, especially in fragile states where violence has not yet fully erupted, so that prevention can be targeted where it is most effective.
Tailor economic policies and capacity-building measures to fragile and conflict-affected states to both overcome fragility and reduce the risk of armed conflict.

The analysis uses simulations that incorporate machine learning-based predictions of conflict.
The IMF is paying greater attention to fragile and conflict-affected states, including through a dedicated strategy.
This blog is based on an IMF working paper by Raphael Espinoza (IMF Western Hemisphere Department), Hannes Mueller (Barcelona School of Economics), Christopher Rauh (Cambridge University), and Benjamin Seimon (Fundació d'Economia Analítica in Barcelona).

Source: How Sound Economic Policy Can Help Prevent Conflict — IMF Blog, March 13, 2025.