BASSETERRE, St. Kitts – LOW-INCOME countries have suffered from the global economic crisis, but they have aggressively worked to ward off the adverse effects, says International Monetary Fund (IMF) Managing Director Dominique Strauss-Kahn.
Strauss-Kahn, in his address to the Resources for the Future meeting in Washington DC yesterday (Sep. 17), said that while low-income countries remain highly vulnerable, policymakers have been more aggressive than in the past.
He stressed that they must not become complacent, however, as there is still much improvement to be seen.
“Since many of these countries ran good policies, they built foundations to ward off the storm. This is something new. In the past, many low-income countries facing such a financial squeeze would have been forced to slash government spending, put administrative constraints on imports, or simply not pay their bills—making the crisis worse,” the IMF General Manager said.
Debt positions have improved substantially and have created a much-needed breathing space for these countries, according to Strauss-Kahn.
He added that the IMF estimates only one-third of low-income countries to be currently at risk for “debt distress”, attributing this improvement to better policies, increased aid and debt relief.
The IMF official underscored the importance of fiscal policies working to counteract the crisis.
“Another benefit of the fiscal cushion is that it can protect the poor and vulnerable from the ravages of the crisis. For many people in these countries, when food prices triple, when jobs are lost, when remittance flows are severed, public social benefits are the only answer. I am heartened that governments have done their best to protect social safety nets.”
In an effort to avoid “downplaying the risks”, Strauss-Kahn said it is critical for the international community to support low-income countries by providing more concessional financing.
“Without this lifeline, the costs of the crisis will be greater and people will suffer,” he noted.
The IMF is boosting its concessional lending by up to US $17 billion through 2014, and is making attempts to make at least US $8 billion of this available within the next two years.
The international financial institution has also approved a US $250 billion increase in Special Drawing Rights (SDR’s), making an additional US $18 billion in resources accessible to low-income countries.
