–Low Income Countries Have Less Fiscal Space, Less Mon Pol Flexibility
–IMF’s Lagarde: Risk Of External Shock To Low Income Countries

By Brai Odion-Esene

WASHINGTON (MNI) – The path ahead for the economies of low income
nations will be “tricky,” as they deal with the spillover effects from
the crisis in the Eurozone, outgoing World Bank President Robert
Zoellick said Saturday.

Speaking alongside him at the press conference following the
meeting of the IMF and World Bank’s Development Committee, IMF Managing
Director Christine Lagarde warned that low-income countries have “less
room for maneuver” should conditions in the global economy take a turn
for the worse.

In a communique released after the meeting, the Development
Committee noted that “the global economic outlook remains challenging,”
but that “policy adjustments and improved economic activity have reduced
the threat of a sharp global slowdown.”

However, growth in emerging and developing economies continues to
be relatively strong, but poor countries still need support, it said.

The communique emphasized the key role of the private sector, and
Zoellick told reporters that the global recovery depends on proper
incentives for private financing, which in turn should boost job
creation.

“At the end of the day, the best safety net is a job,” he said,
adding, “It’s more vital than ever that support be continued to help
developing countries to navigate the tricky road ahead.”

Lagarde agreed, noting that low income countries are facing
“specific risks.”

The main risk is of the external shock coming out of the advanced
economies in crisis, she said, and low income nations have less room to
maneuver because “they have used much of the buffers that they had
before entering into the crisis, they have less scope to use policies.”

Zoellick echoed this sentiment, as these countries have “less
fiscal movement,” and less flexibility in monetary policy should things
take a turn for the worse.

Echoing the communique, Lagarde stressed the need to improve the
quality of growth, saying that it needs to be “more inclusive.”

Zoellick was asked if the over $430 billion increase in the IMF’s
resources by members indicated less concern for the plight of poor
countries, but he countered that the additional funds are earmarked for
the global economy, “so developing nations would certainly benefit.”

In addition to macroeconomic stability, it will also be important to
focus on structural reforms that will drive future growth, Zoellick
said, underlining the communique’s main urging that: ” Implementing
policies and structural reforms to promote poverty reduction and
inclusive growth must continue.”

** MNI Washington Bureau: 202-371-2121 **

[TOPICS: M$$EC$,M$C$$$,M$U$$$,MN$FX$,MT$$$$,MI$$$$,M$J$$$,M$X$$$,M$A$$$]