The International Monetary Fund published a staff paper, discussed by its Executive Board, on macroeconomic developments and prospects in low-income countries, defined as the 70 countries eligible for Poverty Reduction and Growth Trust facilities. The paper and Board assessment point to a highly uncertain global environment and continued divergence across LICs, with inflation easing and imbalances narrowing but debt vulnerabilities remaining high and a shift toward domestic borrowing raising concerns about sovereign bank linkages and financial stability. GDP growth averaged 4.8 percent in 2025 but performance remained highly heterogeneous, and many LICs with thin foreign exchange reserves remain exposed to commodity price swings, global interest rates, and potential further aid cuts, with spillovers from the conflict in the Middle East adding to pressures. External financing has shifted materially, with net inflows down by about one third from the 2010–14 peak as FDI equity flows and external debt flows decline, new public sector borrowing from private creditors occurring at higher interest rates and shorter maturities, and official terms adjusting more gradually; official development assistance has fallen to 4.3 percent of LIC GDP from an average of 5 percent in 2010–14 and is projected to keep declining alongside a move from grants to loans and from budget support to project financing. The analysis links stronger fiscal discipline and institutions, particularly revenue administration and public financial management, to higher and higher quality FDI, and suggests common fiscal incentives attract FDI mainly where fiscal discipline and institutions are strong; Directors also emphasized reforms to mobilize domestic revenue, safeguard priority spending, strengthen transparency and governance, and improve public financial management and debt management, while prioritizing scarce concessional resources toward poorer and fragile LICs with limited market access. Directors looked ahead to further discussions on Fund engagement with LICs and fragile and conflict-affected states in the context of the Comprehensive Surveillance Review, the Review of Program Design and Conditionality, and the Review of the Debt Sustainability Framework for LICs.
International Monetary Fund 2026-03-30
International Monetary Fund Executive Board reviews low-income country prospects and flags persistent debt vulnerabilities and declining external financing
The International Monetary Fund published a staff paper, discussed by its Executive Board, on macroeconomic developments and prospects in low-income countries eligible for Poverty Reduction and Growth Trust facilities, highlighting easing inflation and narrowing imbalances but persistent debt vulnerabilities and rising financial stability risks from increased domestic borrowing. The paper notes average GDP growth of 4.8 percent in 2025 amid highly heterogeneous performance, declining external financing and official development assistance, and greater exposure to commodity prices, global interest rates, and geopolitical spillovers. Directors stressed stronger fiscal discipline, domestic revenue mobilization, transparency, governance, and better public financial and debt management, with scarce concessional resources focused on poorer and fragile low-income countries with limited market access.