Fragile and Conflict-Affected States (FCS)
Overview
Fragile and conflict-affected states are home to nearly 1 billion people facing many challenges—from low-capacity institutions and the limited provision of public goods to extreme poverty, forced displacement, and even war. Fragility and conflict are also linked to trends such as climate change, food insecurity, and persistent gender inequalities. The economic impact of the COVID-19 pandemic has been most severe in FCS, where per capita incomes are estimated to recover to 2019 levels only after 2024. If these trends persist, 60 percent of the global poor may live in FCS by 2030. FCS are at thus a significant risk of falling behind in their post-pandemic recovery, but also in achieving the Sustainable Development Goals. In addition, spillovers originating in FCS can also threaten macroeconomic stability and inclusive growth prospects in neighboring countries and regions.
Therefore, the IMF is stepping up its engagement with fragile states, including by completing its first FCS Strategy. This Strategy aims to provide robust, well-tailored, and longer-term support to help these vulnerable countries achieve macroeconomic stability, strengthen resilience, promote sustainable and inclusive growth, and exit fragility. While the Strategy is primarily focused on FCS, it is also relevant for countries at risk of becoming fragile and conflict-affected—whether due to internal factors or external shocks and spillovers
The IMF’s new FCS strategy has been developed through an extensive consultation process. The Fund has received feedback from over 55 organizations including the World Bank and regional development banks, the United Nations system, civil society organizations (CSOs), think tanks, and academia.
The IMF has had a long-standing engagement with fragile and conflict-affected states. Over the past decade, the Fund has provided emergency financial support worth US$7.5 billion to 28 economies considered FCS. During the COVID-19 pandemic, the Fund and the World Bank have actively supported the implementation of the G20 Debt Service Suspension Initiative (DSSI) in which 24 eligible FCS have requested to participate since 2020. FCS have also benefited from US$16.2 billion from the recent SDR allocation – which directly boosted foreign exchange reserves, supporting external stability and confidence. The FCS Strategy builds on this experience and lessons learned, providing a framework and a set of measures that will allow the Fund to better support its most vulnerable members. These include:
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Greater tailoring of Fund engagement and instruments to the country-specific manifestations of fragility and conflict. The Strategy makes the case that the implications of fragility and conflict are macro-critical and directly relevant to the IMF’s mandate. It outlines principles of engagement to ensure that the IMF’s comparative advantage will be effectively leveraged to help country authorities in FCS achieve better macroeconomic outcomes. The Strategy also provides for stepped-up capacity development to strengthen economic institutions in FCS and greater agility of the IMF’s lending toolkit.
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Closer proximity to our most vulnerable members. As exiting fragility and building resilience take time, the Strategy will lead to an expanded Fund presence in FCS to help country authorities respond to economic challenges associated with fragility and conflict, and deliver tailored support over the long run.
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Stronger partnerships to amplify the Fund’s impact. Since progress in FCS requires a unified effort among partners, the Strategy spells out how the IMF will work with development, humanitarian, and peace actors who play a key role in helping FCS make progress.