WASHINGTON D.C., United States, Wednesday May 1, 2013 – The International Monetary Fund (IMF) says the Caribbean and other low-income countries are among the fastest-growing economies in the world, but warns that many remain vulnerable to shocks and spillovers from advanced and emerging markets.
“Low-income countries have worked to develop institutional capacity and build fiscal buffers that they were able to use during the crisis, and now, all the hard work has paid off,” IMF Deputy Managing Director Min Zhu told an IMF seminar.
But he said these economies should take this opportunity to shore up their resilience to potential new shocks if they hope to sustain their current growth momentum.
In the months leading up to the Spring Meetings, the Washington-based financial institution said it had stepped up its work on low-income countries, publishing a comprehensive review of its concessional lending instruments, as well as new research on growth prospects for economies in this category.
Hugh Bredenkamp, deputy director of the IMF’s Strategy, Policy, and Review Department, said low-income countries are experiencing strong expansion that is based on relatively solid fundamentals.
Speaking at the seminar, “Low-Income Countries in the Global Economic Recovery: Strengths, Vulnerabilities, and the Role of the IMF,” Bredenkamp pointed to clear signs that growth in low-income countries was firmly rooted.
He said low-income countries are relying less on domestic demand and more on external demand as the world starts to recover from the recent crisis.
He also said inflation has come down steadily in the Caribbean and other low-income countries, despite occasional spikes related to commodity price shocks.
“All this suggests that low-income countries’ currently strong economic performance has strong foundations, and from that perspective, we see good chances of it being sustained over the medium term,” he said.
During the 2008-09 global economic crisis, Bredenkamp said the Caribbean and other low-income countries did experience a downturn, but they bounced back more rapidly than the rest of the world.
The analysis of the Spring Meetings comes on the heels of a comprehensive review of its concessional lending instruments, encompassing both the funding model for subsidy resources and the design of the facilities.
This latest review follows on the 2009 overhaul of concessional lending, which changed the architecture of the IMF’s lending facilities to make them more flexible and responsive to the diverse needs of low-income countries.
The IMF said the review accomplished several objectives, including the establishment of a self-sustaining funding model for the IMF’s concessional lending.
The review also aimed to make lending to low-income countries more flexible by raising the cumulative borrowing limit under the Rapid Credit Facility, the IMF’s channel for delivering quick emergency support; allowing loans to be augmented more quickly when shocks hit; and relaxing some of the restrictions on the use of precautionary lending facilities.
At the Spring Meetings, World Bank President Jim Yong Kim announced his objective of “setting an expiration date” for extreme poverty by reducing the percentage of people living on less than $1.25 a day to 3 percent by 2030, from 21 percent in 2010.
The IMF said this objective, endorsed by the joint IMF-World Bank Development Committee, will lay the foundation of a strategy that the World Bank says it will present at the Annual Meetings in October 2013.