Washington: The global community can help poor countries weather the current slowdown in the world economy by keeping trade flowing, encouraging investment and making good on aid promises, the head of the International Monetary Fund said on Wednesday. IMF Managing Director Christine Lagarde said more than a decade of economic progress in poor countries could be undermined by a new phase of the financial crisis.
Concerns over a sovereign debt crisis in Europe and a slowing recovery in the United States have rattled financial markets and slowed economic growth in both regions.
"The international community - including the IMF - must be prepared to do even more to help the low-income countries help themselves," she told a high-level seminar before the start of IMF and World Bank meetings this week. It was vital, she added, that poor nations protect spending for the most vulnerable households and safeguard economic growth, which is essential for tackling poverty.
The Fund said on Tuesday Sub-Saharan Africa was poised to maintain its economic expansion but a faltering U.S. or European recovery could slow exports, aid and capital flows. The region is expected to grow at a rate of 5.2 percent in 2011 and 5.8 percent next year. That compares to IMF growth forecasts for Europe and the United States of less than 2 percent this year and next.
Poor countries were hard hit during the 2009 financial crisis by a collapse in global demand, but quickly found their footing again, which the IMF attributed to more than a decade of sound economic policies.
Lagarde said governments in poor countries should use monetary and exchange rate policies to deal with current global uncertainty. "The scope for counter-cyclical fiscal policy has become more limited, monetary and exchange rate policy could be used more actively - provided that inflation is moderate," she said.
Lagarde said it was important that economies are diversified and not too dependent on a few products and trading partners, so they are able to withstand shocks. "We must all do our part. If we do, I believe that the low-income countries will be able to withstand this new phase of the crisis." she added.
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