## Poorest Countries and Fragile States Are Increasingly Falling Behind

_IMF Blog, June 26, 2025_

## Source details

**Canonical URL:** [Poorest Countries and Fragile States Are Increasingly Falling Behind](https://www.imf.org/en/blogs/articles/2025/06/26/poorest-countries-and-fragile-states-are-increasingly-falling-behind)

## Other formats

- [Markdown version](/en/blogs/articles/2025/06/26/poorest-countries-and-fragile-states-are-increasingly-falling-behind/index.md)
- [Structured JSON version](/en/blogs/articles/2025/06/26/poorest-countries-and-fragile-states-are-increasingly-falling-behind/index.json)
- [Bundle manifest](/en/blogs/articles/2025/06/26/poorest-countries-and-fragile-states-are-increasingly-falling-behind/bundle-manifest.json)

## Bibliographic details
- Authors: Guillaume Chabert, Robert Powell
- Published: June 26, 2025

---

### Overview
- Authors: Guillaume Chabert, Robert Powell
- Date: June 26, 2025
- Main message: The significant shocks of the past five years have weighed heaviest on low-income countries and fragile and conflict-affected states, with poorest and fragile countries lagging in recovery and facing disproportionate poverty, food insecurity, and debt vulnerabilities.

### Growth performance and divergence
- Among low-income countries (defined as the 70 countries eligible for IMF concessional lending, the Poverty Reduction and Growth Trust):
  - 38 of the more advanced low-income countries—characterized by higher income, varied exports, and international capital market access—grew by an average of 5.3 percent from 2022-24.
  - The poorest 32 in the group grew by 3.3 percent from 2022-24.
- Fragile and conflict-affected states recorded growth of 2.6 percent from 2022-24.
- Implication: While some more robust low-income countries may soon achieve emerging status, the poorest and fragile counterparts are increasingly falling behind, threatening convergence of income per person with advanced economies.

### Financing flows, needs, and debt vulnerabilities
- Financing flows to developing countries, especially low-income countries, have significantly declined since the onset of the pandemic, despite large needs for education, health, and infrastructure spending.
- Reversing the decline in new and affordable financing and ensuring sufficient recurrent flows is essential.
- Debt vulnerabilities are disproportionately affecting the poorest and fragile and conflict-affected states and should be proactively addressed.
- Recommendation themes:
  - For wealthier developing countries: focus on attracting more foreign investment and international private finance, supported by bilateral and multilateral partners where needed.
  - For poorest and fragile countries: prioritize adequate financial support through grants or highly concessional loans and provide technical assistance to build institutional capacity.
  - Improve restructuring processes to deliver efficient and timely debt restructuring where debt is not sustainable.
  - Develop risk-sharing instruments to attract more private investor participation where appropriate, while ensuring private debt is incurred sustainably given higher private finance costs.

### Building institutional capacity
- Strengthening public financial management, spending efficiency, and tax capacity are core to building institutional capacity.
- IMF research published in 2023 estimates that a 7 percentage-point increase in the ratio of tax revenue to economic output is feasible for low-income countries through tax system reform and institutional capacity building.
- IMF support:
  - Between 2022 and 2024, low-income countries received over 40 percent of the IMF’s overall capacity development with its member countries.
  - The IMF will continue to use policy advice, capacity development, and balance of payments financial support where relevant to help members achieve economic and financial stability.

### Policy recommendations and priorities
- Provide adequate financial support to poorest and fragile countries via grants and highly concessional loans.
- Intensify technical and financial assistance from the international community, including timely debt restructuring where needed.
- Help wealthier developing countries crowd in foreign investment and international private finance, with partner support as needed.
- Develop and expand risk-sharing instruments to mobilize private investors where appropriate.
- Ensure private debt is incurred in a sustainable manner given higher costs of private finance.
- Further improve debt restructuring processes to be efficient and timely for countries with unsustainable debt.

*This blog draws on a recent IMF policy paper detailing the Fund’s contribution to the agenda at the International Conference on Financing for Development from June 30 to July 3, 2025.*

---


## References

- [policy paper](https://www.imf.org/en/Publications/Policy-Papers/Issues/2025/06/05/The-4th-Financing-for-Development-Conference-Contribution-of-the-IMF-to-the-International-567479)

_Source: https://www.imf.org/en/blogs/articles/2025/06/26/poorest-countries-and-fragile-states-are-increasingly-falling-behind_