Creating Policy Space in Low-Income Countries during the Recent Crises

Departmental Papers, March 16, 2010

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Canonical URL: Creating Policy Space in Low-Income Countries during the Recent Crises

Authors: Paolo Dudine, Sibabrata Das, Pritha Mitra, Yongzheng Yang, Eteri Kvintradze, Nkunde Mwase
Published: March 16, 2010
Series: Departmental Papers
DOI: https://doi.org/10.5089/9781589069305.087

Low-income countries were hit especially hard by sharp increases in world food and fuel prices in 2007-08 and the global financial crisis that followed.
In response, the International Monetary Fund scaled up its financial assistance to low-income countries and revamped its concessional lending facilities to make them more flexible in meeting the diverse needs of these countries.
The paper assesses empirically the outcome of the IMF response and provides insight into how IMF-supported programs in low-income countries have been adapted to the changing economic circumstances in these countries.
The authors report that these programs have provided expanded policy space in the face of the global price shocks and financial crisis.

External shocks highlighted: sharp increases in world food and fuel prices in 2007-08; the global financial crisis of 2008-2009.
IMF operational response: scaled up financial assistance to low-income countries; revamped concessional lending facilities to increase flexibility.
Empirical assessment outcome: IMF-supported programs in low-income countries have been adapted to changing economic circumstances and provided expanded policy space during the crises.

Subjects: Financial crises, Fiscal policy, Food prices, Fuel prices, Global financial crisis of 2008-2009, Inflation, Prices
Keywords: balance of payments, country, country authorities, current account, DP, DPPP, economic activity, fiscal policy, Food prices, fuel price, Fuel prices, Global, Global financial crisis of 2008-2009, Inflation, LICs, price, social spending, spending, The Fund