Low-Income Countries Need Extra Support to Cope With Crisis

• Author: International Monetary Fund

In a September 17 speech at the Center for Global Development in Washington, D.C., he observed that thus far, low-income countries have weathered the global financial crisis better than expected. "But low-income countries remain highly vulnerable", he stressed, "so we cannot be complacent."

Strauss-Kahn called on the international community to ensure that any global recovery also lifts the low-income countries. "These countries desperately need additional financing to tide them over, to give them adequate breathing space to cope with this crisis," he said.

Strauss-Kahn emphasized that most low-income countries have responded well to the global financial crisis thanks to sound economic policies. "Since many of these countries ran good policies, they built foundations to ward off the storm. 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. But this time is different", he said.

Improved policies

Because of improved policies, three quarters of low-income countries had been able to increase their budget deficits to help combat the crisis. Of 27 low-income countries with available data, 26 had managed to preserve or increase social spending-a significant achievement in the current environment.

There had also been an unprecedented scaling up of IMF financial support and policy advice to low-income countries, Strauss-Kahn noted. This had helped provide poorer countries with the necessary room to ease macroeconomic policies. The IMF had gone "above and beyond" what the G-20 London summit of advanced and emerging market countries had...