The economic crisis: And the biggest loosers are...

the most vulnerable countries

According to the IMF (International Monetary Fund), the global financial crisis will significantly worsen the budgetary position of many Low Income Countries (LIC) governments up to the level where they will need international aid to be able to survive the crisis.

Why are LIC countries particularly vulnerable? Because they don't have a buffer more developed countries have...

On one hand, government revenues are expected to suffer as economic activity slows and commodity prices fall. Potential declines in donor support and tighter financing conditions will likely impose further pressures on their budgets.

On the other hand, many countries will need to increase spending to protect the poor, and additional spending pressures may arise from currency depreciation and rising interest rates, which could raise debt service costs.

The most vulnerable countries are: Albania, Angola, Armenia, Burundi, Central African Rep., Congo DRC, Côte d'Ivoire, Djibouti, Ghana, Haiti, Honduras, Kyrgyzstan, Laos, Lesotho, Liberia, Mauritania, Moldova, Mongolia, Nigeria, Papua New Guinea, St. Lucia, St. Vincent & Grenadines, Sudan, Tajikistan, Vietnam and Zambia.

Baseline projections for 2009 foresee a total balance of payments shock of US$165 billion for these countries. They will need at least US$25 billion of financial assistance to offset the impact of the shock on their international reserves. The needs could be much larger — approaching US$140 billion in a “bad case” scenario. (The full IMF report)

2 comments:

Anonymous,  11 March, 2009 16:18  

The climate crisis combined with the financial crisis, results in a food crisis.

Again, it's the world's poorest who are most affected.

A global fund is needed to secure food stocks in advance rather than buying hurriedly when a crisis hits: http://bit.ly/vWyhN

Peter 14 March, 2009 16:37  

@Abby

- I agree. Your link indeed helps with the food/hunger issue... The question for me is, how much the economic crisis will set back the progress in development many countries had in the past years...

Many countries (and many people) are falling back below the poverty line...

Peter

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