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Peter Isard, Leslie Lipschitz, Alexandros Mourmouras, and Boriana Yontcheva


Since the adoption of the Millennium Development Goals (MDGs) in 2000, the challenge of reducing poverty around the world has been more prominent on the agenda of the international community.1 Relatively slow progress toward meeting the MDGs by the 2015 target date has added to the urgency of this effort. Two influential reports—the United Nations Millennium Project Report (the “Sachs Report”) and the Commission for Africa Report (the “Blair Report”)—envisage substantial increases in aid flows to poor countries, especially to countries in sub-Saharan Africa. The international community sees increases in aid, along with improvements in recipient policies and freer global trade, as necessary for global prosperity and poverty reduction.

International Monetary Fund


The Poverty Reduction Strategy Paper (PRSP) approach has been broadly accepted as the operational framework for bringing together national policies and development assistance in support of low-income countries’ efforts to meet the Millennium Development Goals. The IMF, the World Bank, and other multilateral and bilateral development agencies are now committed to using the PRSP operational framework to support low-income countries; and the IMF is aligning the content and process of its operations to reflect this commitment.

International Monetary Fund. African Dept.


Between 2002 and 2007 sub-Saharan Africa’s output grew annually by some 6½ percent—the highest rate in more than 30 years. But with the onset of the great recession, economic growth has faltered in many economies in the region; output is expected to expand by just 1 percent in 2009 (Table 1.1). This will cause per capita income in the region to decline by about 1 percent—the first such drop in a decade. Sobering as this picture is, it is ameliorated somewhat by the fact that prudent macroeconomic policies in recent years have given many countries some policy space to counter the effects of the slowdown. Provided this room is utilized and global economic growth recovers as currently expected, growth in sub-Saharan Africa should pick up to some 4 percent in 2010—although there are significant downside risks. Against this backdrop, IMF staff recommend that, wherever debt sustainability or already high inflation rates are not a binding constraint, fiscal and monetary policies should remain supportive until there are clear indications that the recovery is gaining momentum. In countries where financing is a problem, the focus should remain on containing macroeconomic imbalances lest these further undermine economic growth. For these countries, concessional financing is the most viable way to mitigate the impact of the slowdown on vulnerable groups.

Yongzheng Yang, Mr. Robert Powell, and Mr. Sanjeev Gupta


This handbook provides a checklist of the macroeconomic challenges that low-income countries are likely to face if they begin to receive significantly higher official development assistance (ODA) than in the recent past. The checklist, which is derived from a survey of the economic literature, is a tool for developing illustrative macroeconomic scenarios for individual countries in response to a scaling up of aid flows. For example, one scaling-up scenario might involve a doubling of official resource transfers as a share of a recipient country’s GDP, with higher aid flows being sustained for a decade or more.