Poor Countries Need U.S.$25 Billion Up-Front - IMF

Africa: Poor Countries Need U.S.$25 Billion Up Front - IMF
Mariam Isa
4 March 2009

Johannesburg — POOR countries urgently needed at least $25bn in low-cost finance this year to help their economies ride out the global financial crisis, the International Monetary Fund (IMF) said yesterday.
IMF MD Dominique Strauss-Kahn warned that there was a real risk the world economy would contract this year. He said this would be reflected in the IMF's updated growth forecasts next month.
News and data had worsened since the IMF predicted the global economy would grow 0,5%, he told reporters in a video conference link between Washington and Johannesburg.
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This meant "the probability of our next global forecast being lower than that is very high".
The risk of a forecast below zero was a serious risk, he said.
If the global downturn worsened, the number of the most vulnerable economies could almost double from 20 now, while their funding needs could rise to $140bn, the Washington-based lender said.
Most of those countries were in sub-Saharan Africa, expected to grow just more than 3% this year, compared with 4% for low-income countries overall, the IMF said in a report.
"I believe we have to scale up the support we supply to Africa. We are urging donor countries not to reduce aid flows," Strauss-Kahn said. This was necessary despite the fact that advanced economies were grappling with what is set to be the worst global financial crisis for 80 years.
The report said, "At a time when the advanced economies are spending hundreds of billions of dollars on fiscal stimulus and financial sector restructuring, we must find room to help low-income countries."
Strauss-Kahn said there were also plans to help Zimbabwe.
Finance Minister Trevor Manuel had contacted him on how to "resume normal relations" with Zimbabwe, and they would discuss this further at an IMF conference in Tanzania next week. "No decisions have been made," he said.
Antoinette Sayeh, head of the IMF's Africa department, said the IMF was preparing to send a mission to Zimbabwe.
"The international community will have a significant challenge with Zimbabwe's arrears. They will have to be cleared before we can engage with Zimbabwe," she said.
"We have a mission going to Zimbabwe to discuss with the authorities their policy ambitions and reform agenda, to assess whether the international community can support in a way which is significant," Sayeh said. IMF officials said Zimbabwe's arrears with the IMF stood at about $130m, but the country would also have to clear much larger amounts owed to the World Bank and the African Development Bank.
It has been about two years since the institution last sent a mission to the country.
Southern African Development Community ministers decided last week to push for donor aid for Zimbabwe but deferred a decision on a rescue package to a regional summit.
The international community is sceptical about whether the unity government of President Robert Mugabe's Zanu (PF) and Prime Minister Morgan Tsvangirai's Movement for Democratic Change will last.
Sayeh said the IMF was also looking at its growth forecasts for SA, which the government predicts will reach 1,2% this year. But analysts are increasingly revising their growth forecasts for SA below 1%, with some now predicting the country faces recession. "SA has done reasonably well on the financial sector, and it's not very dependent on international funding ... but as the domestic economy slows, concerns over the quality of bank assets rise," Sayeh said.
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Poor countries were being hit by falling demand for their exports, the commodities prices slump and drying up of investment and aid.
The IMF report said lower growth would have serious implications for poverty and political stability so social safety net programmes should be ramped up. The $25bn needed by the most vulnerable countries amounted to 80% of yearly aid to all low-income countries in recent years, it said.