How financing can boost low-income countries’ resilience to shocks – Experts

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Experts have said that multilateral financing can boost the resilience of low-income countries to global financial shocks.

They noted that with low-income countries first from the Covid-19 pandemic and now the disruption of global supply chain due to the Russian-Ukraine war, increased financing would help abate the impact on poor and vulnerable nations.

According to Karmen Naidoo and Nelson Sobrinho, in a research, economic gains from $272 billion in pandemic support for 94 countries were strongest in the poorest and more vulnerable recipients of IMF concessional financing

Low-income countries face multiple economic challenges—including rapid inflation, food insecurity, costly borrowing, and mounting debt—heightened by shocks from the pandemic and Russia’s war in Ukraine.”

The Fund had earlier this year, revised downwards its growth projections for low-income countries, where per capita income growth is falling further behind the rates needed to catch up with advanced economies.

The Bretton Woods Institute stated that the situation threatens to reverse a decades-long trend of steadily converging living standards.

Naidoo said:”To boost economic growth and put them back on a path to income convergence with advanced economies, we estimate that low-income countries need an additional $440 billion of financing through 2026 from all available sources. As part of this, IMF concessional financing offered at low or zero interest rates will play a key role in helping these countries cushion the impact on growth from ongoing shocks and future crises.

“The benefits of such financing were visible during the pandemic, when IMF-funded economies, on average, saw stronger, faster recoveries than unfunded counterparts, based on readings across three indexes tracking economic activity,” Sobrinho said.

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