## IMF Executive Board Discusses Macroeconomic Developments and Prospects in Low-Income Countries—2021 _IMF News, March 30, 2021_ ## Source details **Canonical URL:** [IMF Executive Board Discusses Macroeconomic Developments and Prospects in Low-Income Countries—2021](https://www.imf.org/en/news/articles/2021/03/30/pr2192-imf-execboard-discusses-macroeconomic-developments-and-prospects-in-lics-2021) ## Other formats - [Markdown version](/en/news/articles/2021/03/30/pr2192-imf-execboard-discusses-macroeconomic-developments-and-prospects-in-lics-2021/index.md) - [Structured JSON version](/en/news/articles/2021/03/30/pr2192-imf-execboard-discusses-macroeconomic-developments-and-prospects-in-lics-2021/index.json) - [Bundle manifest](/en/news/articles/2021/03/30/pr2192-imf-execboard-discusses-macroeconomic-developments-and-prospects-in-lics-2021/bundle-manifest.json) ## Bibliographic details - Published: March 30, 2021 --- ### Overview - Press Release No. 21/92; March 30, 2021. IMF Communications Department. - On March 26, 2021, the Executive Board discussed an IMF staff paper on recent economic developments and prospects in low-income countries (LICs). - LICs are defined as those countries eligible for Poverty Reduction and Growth Trust facilities (69 countries in Africa, Asia, and Latin America). - LICs entered the COVID-19 period with limited policy space and experienced a sharp output loss: real annual GDP growth in 2020 declined to 0.3 percent (from above 5 percent in the previous three years). ### Financing needs, scenarios, and numeric estimates - Base additional needs to respond to the pandemic and build buffers: - "around $200 billion up to 2025" (initial statement). - "beyond the needs embedded in the World Economic Outlook projections, LICs would require an additional $200 billion between 2021-25" (staff paper estimate). - Executive Board: "around US$200 billion will be needed to step up the spending response to COVID and rebuild or maintain external buffers." - Investment needs to accelerate convergence: - "an additional $250 bn to accelerate their income convergence with advanced economies" (staff paper). - Executive Board: "An additional US$250 billion in investment spending would be needed to accelerate convergence to advanced economies." - Downside (adverse) scenario: - "A downside scenario of a slower global recovery could add a further $100 billion to these financing needs" (staff paper). - Executive Board: "Should the risks identified in an adverse scenario materialize, an additional US$100 billion would be necessary." - Timing and scope: - Main financing window assessed: 2021-25. - The paper responds to requests from the International Monetary and Financial Committee (IMFC) and the Group of 20. ### Macroeconomic effects and outlook - Pandemic impacts: - Significant health and economic effects on LICs, higher debt levels, increased within-country inequality and poverty, and delayed income convergence with advanced economies. - Projections and conditional outcomes: - With appropriate financing and decisive policy implementation, LICs "would be able to converge back to their pre-COVID convergence path to advanced economies between 2023 and 2025." - Risks highlighted: - Uncertain economic outlook, risk of renewed lockdowns due to resurgent waves and variants, uneven access to vaccines, limited policy space, and preexisting vulnerabilities. ### Policy recommendations and sustainable financing options - Domestic policy and reform priorities: - Implement domestic reforms—especially related to the governance of economic institutions. - Raise revenues and improve efficiency of spending. - Address governance, institutional capacity, and other structural bottlenecks. - External financing and international support: - Stepped up financing by the international community, including grants and concessional loans by bilateral donors and multilateral institutions. - Debt restructuring where needed. - Expand role of private sector financing—particularly for infrastructure financing by international investors. - Continued IMF emergency financing, World Bank and multilateral development bank support, and initiatives such as the G20-led Debt Service Suspension Initiative and Common Framework have temporarily eased financing constraints for many LICs. ### Executive Board assessment and consensus - Directors welcomed the assessment of macroeconomic developments, financing needs, and sustainable financing options for LICs. - Directors broadly agreed with the financing estimates and policy measures, while noting underlying uncertainty and emphasizing sensitivity tests as providing reasonable approximation of additional needs relative to the baseline. - Directors emphasized a multifaceted approach combining: - Strong domestic reforms and capacity development (with policy advice and capacity development from the Fund and other development partners). - Stepped up international financing, debt restructuring where necessary, and catalyzing private-sector financing. - Directors were encouraged that, with appropriate financing and decisive policy implementation, LICs could return to pre-COVID convergence paths between 2023 and 2025. *IMF Executive Board Discusses Macroeconomic Developments and Prospects in Low-Income Countries—2021; Press Release No. 21/92; March 30, 2021.* --- ## References - [https://www.imf.org/-/media/images/imf/bios/imfboard.jpg](https://www.imf.org/-/media/images/imf/bios/imfboard.jpg) - [The Executive Board](https://www.imf.org/external/np/sec/memdir/eds.aspx) - [Press Releases](https://www.imf.org/en/news/searchnews) - [PRESS CENTER](http://presscenter.imf.org/) - [recent economic developments and prospects in low-income countries](https://www.imf.org/en/Publications/Policy-Papers/Issues/2021/03/30/Macroeconomic-Developments-and-Prospects-In-Low-Income-Countries-2021-50312) - [Poverty Reduction and Growth Trust](https://www.imf.org/en/About/Factsheets/IMF-Support-for-Low-Income-Countries) - [http://www.IMF.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm) - [https://www.imf.org/en/home](https://www.imf.org/en/home) _Source: https://www.imf.org/en/news/articles/2021/03/30/pr2192-imf-execboard-discusses-macroeconomic-developments-and-prospects-in-lics-2021_