Low-income developing countrie

Photo by Muhammadtaha Ibrahim Ma’aji on Unsplash

Low-income developing countries at risk of a ‘lost decade’

Without help, low-income nations in Africa and elsewhere are at huge risk of losing recent gains due to the pandemic, the IMF warns.

Low-income developing countrie

Photo by Muhammadtaha Ibrahim Ma’aji on Unsplash

While the pandemic is sending shockwaves around the globe, low-income developing countries (known as LIDCs) are in a particularly difficult position to respond, the Washington-based International Monetary Fund says in a blog published on Thursday.

Countries classified as LIDGs include a large swathe of African states, among them: Mozambique, Madagascar, Ghana, Guinea, Ivory Coast, Congo DRC, Niger, Nigeria and Rwanda.

Constrained by limited resources and weak institutions

The IMF says LIDCs have been hit hard by external shocks and are suffering severe domestic contractions from the spread of the virus and the lockdown measures to contain it.

At the same time, limited resources and weak institutions constrain the capacity of many LIDC governments to support their economies.

“Growth … is likely to come to a standstill this year, compared to growth of 5% in 2019,” it warns.

Hit by an exceptional confluence of external shocks

“Further, [without] a sustained international effort to support them, permanent scars are likely to harm development prospects, exacerbate inequality, and threaten to wipe out a decade of progress reducing poverty,” the blog states.

Since March, these countries have been hit by an exceptional confluence of external shocks: a sharp contraction in real exports, lower export prices for oil in particular, less capital and remittances inflows, and reduced tourism receipts.

The IMF cites remittances by migrant workers – a common occurrence in Africa – which exceed 5% of GDP in 30 of the 59 countries classified as LIDCs.

Remittances have fallen almost 40% in some places

These remittances have fallen almost 40% in some countries and the repercussions are likely to be felt widely where remittances are the main source of income for many poor families.

The IMF says that, while the pandemic has evolved more slowly in these countries than in other parts of the world, it is now inflicting a sizeable toll on economic activity.

Most LIDCs cannot sustain strict containment measures for long as large segments of the population live at near-subsistence levels. Large informal sectors, weak institutional capacity and incomplete registries of the poor make it difficult to reach the needy. Further, governments have only limited fiscal resources to support them.

Risk of running out of food during lockdowns

“Recent surveys conducted across 20 African countries reveal that more than 70% of respondents risk running out of food during a lockdown that lasts more than two weeks,” the blog states.

“The COVID-19 pandemic will be defeated only when it and its socioeconomic consequences are overcome everywhere. Urgent action by the international community can save lives and livelihoods in LIDCs,” it continues.

The writers say the International Monetary Fund is doing its share: among other things, the IMF has provided emergency financing to 42 LIDCs since April. They add that the organisation stands ready to provide more support and help design longer-term economic programs for a sustainable recovery.