Rekindling Growth in Low-Income Countries a Shared Task

Priority is to restore strong, inclusive growth

Fiscal space needed for infrastructure investment and social spending

Enhanced global cooperation could help lift millions more out of poverty

While the strong macroeconomic performance of low-income countries during the crisis is the “good news,”, the “bad news” is that fewer people were brought out of poverty, he said.

Strauss-Kahn was addressing a group of international parliamentarians at the Belgian Parliament as well as participants in European Development Days, a forum bringing together heads of state, parliamentarians, donors, international organizations, academics, and a broad range of civil society groups.

IMF support during the crisis

Good policies prior to the outbreak of the global financial crisis meant that many low-income countries had room to let their fiscal automatic stabilizers operate and increase real spending during the crisis. IMF support also made a difference, and helped protect the poorest and other vulnerable groups, Strauss-Kahn said.

During the crisis, the IMF quadrupled its concessional lending to low-income countries, offered at zero interest rates through the end of 2011. Almost 90 percent of countries with an IMF-supported program increased real spending, compared with 67 percent of countries that did not receive IMF support. In 2009, real spending on health and education in low-income countries was up by 10 percent, and public investment increased by 17 percent.

“This shows that IMF-supported programs helped countries to cope with the crisis and go further than they might otherwise have been able to do,” he said.

Making up lost ground

Despite such progress, the World Bank estimates that about 70 million fewer people will have escaped from the chains of poverty by 2020 because of the global financial crisis and the food and fuel crisis that preceded it. Many millions more will suffer the consequences of prolonged unemployment and underemployment.

In order to make up for lost ground, all must play their part—the developing countries themselves, the advanced economies, and the international institutions, Strauss-Kahn said. Cooperative action could boost world growth by 2½ percentage points over five years, create 30 million new jobs, and lift 33 million people out of poverty, according to IMF analysis.

Keeping promises on aid

Strauss-Kahn urged advanced countries to keep the Gleneagles promises on aid, and find ways of channeling financial...