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December 2022

IMF staff regularly produces papers proposing new IMF policies, exploring options for reform, or reviewing existing IMF policies and operations. The following documents have been released and are included in this package:

  • A Press Release summarizing the views of the Executive Board as expressed during its December 1, 2022, consideration of the staff report.

  • The Staff Report, prepared by IMF staff and completed on November 2, 2022, for the Executive Board’s consideration on December 1, 2022.

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© 2022 International Monetary Fund

Press Release


IMF Executive Board Discusses Macroeconomic Developments and Prospects in Low-Income Countries—2022


Washington, DCDecember 8, 2022: On December 1, 2022, the Executive Board of the International Monetary Fund (IMF) discussed the IMF staff paper on recent macroeconomic developments and prospects in low-income countries (LICs). The report also includes in-depth discussion of the role that capacity development on debt management plays in mitigating debt vulnerabilities. The paper defines LICs as those 69 countries eligible for the Poverty Reduction and Growth Trust facilities.1

The compound shocks from the pandemic and Russia’s war in Ukraine have disproportionally affected LICs. They now face the challenge of resuming income convergence against the backdrop of a weak and uncertain global economic environment.

The strong rebound of growth in 2021 lost momentum in 2022, while inflation is accelerating rapidly. Fiscal deficits widened, thus further exacerbating debt vulnerabilities. Debt sustainability indicators have not yet reached the levels observed on the eve of the Heavily Indebted Poor Countries (HIPC) Initiative, but the shift in creditor landscape toward Non-Paris Club and private creditors brings new challenges for a swift and orderly debt restructuring where and when necessary. While sound policy framework, fiscal consolidation, and decisive action to revitalize growth remain the fundamental solution to sustainable debt, debt restructuring, when necessary, would also help tackle debt vulnerabilities. It will therefore be crucial to make debt restructurings under the G20 Common Framework more effective and timelier.

Capacity development on public debt management (CD) will also play important role in enabling LICs to mitigate debt vulnerabilities and sustainably cover their financing needs. The Fund is well positioned to respond to LICs current and evolving requests for CD that takes account of a more complicated borrowing landscape that has increased costs and risks. Future debt management improvements in LICs will require steadfast commitment on the part of both the authorities and CD providers, including paying more attention to the supportive enabling conditions, such as public debt management institutional arrangements and legal frameworks.

Looking at longer-term challenges, LICs have lost several years of progress towards achieving the Sustainable Development Goals (SDGs). Setbacks have been observed in major indicators, including poverty and education, while LICs are under rising threat from climate change. With greater challenges under more constrained resource envelope, removing structural barriers to sustained and inclusive growth has become ever more important.

The international community and multilateral institutions, including the Fund, have stepped up support to LICs by providing policy advice, financing, and capacity development. However, the financing needs for LIC remains large. Updated estimate on the additional financing needs for LICs to address the legacy of COVID, rebuild external buffers and accelerate income convergence amounts to about $440 billion over the period 2022–26.

On their side, policymakers should confront challenges in both near and long term. They should wield all instruments available concertedly to achieve as best as possible the multiple competing near-term objectives: fighting inflation, protecting the vulnerable, preserving growth, containing debt vulnerabilities and managing financial sector risks. Countries should be mindful of maintaining credible fiscal and monetary policy frameworks. In the meantime, they also should not lose sight of longer-term issues, for instance poverty, inequality, climate change and digitalization. Decisive actions on structural reforms that unleash the growth potential will accelerate LICs’ return to the course of income convergence.

Executive Board Assessment2

Executive Directors welcomed the opportunity to discuss recent macroeconomic developments and prospects in LICs. They broadly agreed with the staff’s assessment and the identified policy priorities. Recognizing the worsening trends in growth, inflation, and in many cases fiscal and external balances. Directors expressed concerns over rising debt vulnerabilities, financial stability risks, and food insecurity. They commended the swift actions taken by the Fund, including the establishment of the food shock window (FSW) under the emergency financing instruments.

Directors concurred with staff that although debt indicators still appear to be lower than the pre-HIPC era, debt vulnerabilities are elevated. They observed that reducing debt over the medium term will require a combination of revenue mobilization, careful prioritization toward social and investment spending, and credible policy frameworks, as well as growth-enhancing structural reforms, including to strengthen governance, institutions, and the business climate. Noting that the evolving creditors landscape brings significant challenges to fast and orderly debt restructurings where needed, Directors emphasized the importance of more effective and accelerated processes for debt restructurings under the Common Framework. Directors also called on the Fund, in close collaboration with the World Bank, to support members on sound debt management and transparency, for which the Multipronged Approach to Address Debt Vulnerabilities provides a reference framework.

Directors were concerned about the effects of multiple macroeconomic shocks on progress toward income convergence with advanced economies and achieving the Sustainable Development Goals (SDGs). They stressed that it is important for countries to use all policy instruments available concertedly to address the impact of these shocks in the near-term, while continuing to pursue long-term goals. Directors called on staff to develop more granular advice for LICs on making policy adjustments orderly and smoothly for addressing both near- and long-term challenges, including in areas with increased Fund engagement such as inequality, climate change and digitalization.

Directors were encouraged by the scaling-up of support by the international community. They welcomed the updated estimate of LICs financing needs, while acknowledging the uncertainty surrounding it. Directors commended the Fund for its fast response through the Special Drawing Rights (SDR) allocation and the adaptation of its lending facilities to the shocks, including the Resilience and Sustainability Trust and the FSW. They agreed that it is important to keep the Fund adequately resourced, including by closing the shortfalls in pledges under the ongoing Poverty Reduction and Growth Trust (PRGT) fundraising, while a few Directors also called for the use of internal resources to be considered for the PRGT. More broadly, Directors concurred that increasing the flows of ODA to help meet the financing needs of LICs should remain a prominent objective for the international community. They also emphasized the importance of maintaining an open and rules-based multilateral trade and financial system and avoiding geopolitical fragmentation.

Directors also welcomed the opportunity to discuss the role that public debt management capacity development (CD) plays in enabling LICs to mitigate debt vulnerabilities, particularly after the fundamental changes in the borrowing landscape and sovereign debt structure of LICs during the last two decades.

Directors commended the Fund’s efforts, alongside those of other CD providers, to improve public debt management practices in LICs through a variety of CD modalities covering all areas of public debt management. They noted that regional debt management advisors contribute to CD traction by increasing the responsiveness to emerging needs and tailoring, while also facilitating coordination with other CD providers. At the same time, Directors acknowledged that building effective and robust public management practices in LICs takes time. It requires improvements in both technical skills and institutional, legal, and governance arrangements, while being also conditional on the availability of adequate resources, including staffing.

A number of Directors called for future reports on Macroeconomic Developments and Prospects in LICs to be released ahead of Spring and/or Annual meetings to maximize their visibility and potential to impact strategic, policy and resourcing discussions.

Title page


November 2, 2022


Macroeconomic Developments and Outlook

Russia’s war in Ukraine and the related fallout have created a challenging external environment for the post-pandemic recovery of low-income countries (LICs). Food and commodity prices linger at elevated level with worsening food security. Global financial conditions tighten as major economies are fighting against inflation. The delay in LICs’ income per capita convergence to that of advanced economies (AEs) is expected to last into the medium term.

The war is projected to slow down LICs’ recovery from the pandemic. The upside growth surprise in 2021 decelerated in 2022. Inflation, initially driven by the economic recovery, has accelerated rapidly in 2022, heightening food insecurity and increasing risks of social unrest. Current account deficit widened from the low point in 2020, driven by import recovery in 2021, but more by commodity price hikes in 2022.

LICs’ fiscal position is increasingly under stress as governments ramped up spending to address the impact of the pandemic and the war in Ukraine, and to protect the vulnerable from high food and fuel prices. As a result, debt vulnerabilities have intensified, with an increasing number of LICs being subject to heightened risks of debt distress, in a complex environment marked by a more diverse creditor landscape. The envisaged medium-term consolidation is subject to an array of downside risks.

While the trends in the macro aggregates of most LIC subgroups is similar to the average LIC, each country group has been affected in different degree by the global shocks. Small developing states experienced by far the largest decline in growth while non-fuel commodity and diversified exporters weathered the shocks relatively better. Fragile and conflict-affected states’ growth performance lags behind that of their peers. On the other hand, higher oil prices would support growth in fuel exporters.

The international community and multilateral institutions, including the Fund, stepped up support to LICs in this challenging time, but more needs to be done. An updated estimate indicates that LICs’ additional financing needs to resume and accelerate their income convergence with advanced economies would amount to $440 billion for the period 2022–26, broadly unchanged from the 2021 LIC Report which covered the period 2021–25. This estimate does not include an additional $57 billion in financing needs in 2022–23 due to the war in Ukraine.

Policy makers in LICs face challenging trade-offs both in the near term and in the long run. Fighting inflation while preserving growth and protecting the most vulnerable from shocks, as well as maintaining credible policy frameworks to tackle rising debt vulnerabilities, should be at the center of near-term policy objectives. At the same time, structural reforms to unlock growth potential and deal with longer-term issues, including poverty, inequality, climate change, and promote digitalization, will help accelerate income convergence.

Public Debt Management Capacity Development

With elevated debt levels, high gross financing needs, and rising global interest rates, effective public debt management has become more important than ever. For LICs, improvements in public debt management can play a critical role in mitigating debt vulnerabilities. It is important to ensure that debt managers have adequate tools, staffing, and resources to meet these challenges. The Fund can play an instrumental role by providing and facilitating capacity development in these areas. While fiscal policy is the main driver of public debt, effective debt management is essential to help safeguard debt sustainability, reduce economic and financial volatility, encourage development of the financial sector, and support long-term growth and development.

Effective debt management is built on both technical capacity and a strong institutional framework, which requires a clear mandate, resources and political support from government. While the Fund provides CD in all areas of public debt management, in coordination with other debt management CD providers, specific attention should be given by governments on the basic enabling conditions: Governance, Resources, Information and Policy. The Fund is well positioned to respond to LICs requests for debt management CD, including by strengthening the toolkit in core CD areas such as debt management strategies, investor relations, local currency bond markets and debt reporting. In order to support implementation, the number of regional debt management advisors has been increased and the number of online debt management learning courses has been expanded, which will help engage a larger audience in a cost-effective manner, while also improving the quality of CD delivery.

While public debt management CD can, and has, improved LICs’ capacity to manage public debt, progress will remain gradual. Debt management achievements come over time, often over years rather than months, and require steadfast commitment on the part of the authorities and the supporting CD providers. Country authorities and CD providers should be prepared, and have contingencies ready, for when interruptions, setbacks, and delays arise.

Approved By

Guillaume Chabert (SPR) and Miguel Savastano (MCM)

Prepared by SPR and MCM. This report is prepared under the overall guidance of Guillaume Chabert and Miguel Savastano. The team is led by Roland Kangni Kpodar (SPR) and Thor Jonasson (MCM), which includes Atif Chaudry, Majdi Debbich, Yehenew Endegnanew, Xin Tang (Team Coordinator), Jiangyan Yu (all SPR), Myrvin Anthony (Team Coordinator), Trevor Lessard, Kay Chung, James Knight (all MCM), with inputs from Chuku Chuku (SPR). Research assistance was provided by Musirah Farrukh, Tarun Sridhar and Crystal Zhao (all SPR). Administrative assistance provided by Christie Chea (MCM), Emelie Stewart, Marisol Murillo, and Elisavet Zachou (all SPR).


  • Abbreviations and Acronyms


  • A. The Global Economic Environment: A Challenging Post-Covid Recovery

  • B. Domestic Development in LICs: Navigating Through Unchartered Territory

  • C. Longer-Term Issues

  • D. Multilateral and International Support

  • E. Conclusion and Policy Issues


  • A. Introduction

  • B. The Fund’s Approach to Public Debt Management CD

  • C. Aligning Debt Management CD Delivery to LICs Capacity Gaps

  • D. Concluding Remarks


  • 1. The Resilience of Remittances: A Silver Lining for the Pandemic

  • 2. The G20 Common Framework

  • 3. Loss-of-Learning and The Post-Covid Recovery

  • 4. Structural Reform Priorities in FCS

  • 5. LICs’ External Financing Needs

  • 6. How Have LICs Used Their 2021 SDR Allocations So Far?

  • 7. Getting a GRIP on Public Debt Management

  • 8. The Role of Regional Debt Management Advisors in CD Delivery

  • 9. Other Providers of Debt Management CD


  • 1. Growth Developments and Prospects

  • 2. Global Commodity Price Developments

  • 3. Exposure to Wheat and Potassium Fertilizer Imports from Russia, Belarus, and Ukraine

  • 4. Sovereign Spreads

  • 5. International Arrivals

  • 6. GDP Loss and Income Convergence amid the War in Ukraine and the Pandemic

  • 7. Growth Developments in LICs

  • 8. Inflation Prospects in LICs

  • 9. Fiscal Trends in LICs

  • 10. Components of Revenue and Expenditure

  • 11. Revenue and Expenditure Versus Pre-pandemic Projection (in Real Term)

  • 12. External Sector Developments

  • 13 Remittances and Net FDI Flows to LICs

  • 14. Stock of International Reserves

  • 15. Credit to Private Sector and Non-performing Loans

  • 16. Sovereign Banks’ Exposure

  • 17. Public Debt Developments in LICs

  • 18. Decomposition of Debt Dynamics

  • 19. Debt Composition by Creditor and Trends in Issuance of Marketable Debt by LICs

  • 20. Domestic and External Debt

  • 21. Main Macroeconomic Indicators by Structural Characteristics

  • 22. Main Macroeconomic Indicators by Export Structure

  • 23. Simulating the Poverty and Inequality Impact of the Pandemic

  • 24. The IMF’s Lending Support to LICs

  • 25. ODA to LICs

  • 26. MDB Financing to LICs

  • 27. Key Debt Management Activities

  • 28. Selected IMF Debt Management Capacity Building Delivery to LICs FY2018–22

  • 29. Debt Management CD by Funding Source

  • 30. LIC Survey Results: Challenges in Debt Management: Areas Fund CD Can Help

  • 31. LIC Survey Results: Challenges in Debt Management: Main Obstacles

  • 32. LICs with Eurobond Issuance by Region

  • References


  • I. County Classification

  • II. The Impact of COVID-19 on LICs

  • III. Food Insecurity and Policy Responses to Surging

  • IV. Debt Vulnerability Today and in Pre-HIPC Era

  • V. LIC Debt Management Capacity Development Case

Abbreviation and Acronyms


Asian Development Bank


Advanced Economies


African Development Bank


African Regional Technical Assistance Centre






Balance of Payments


Caribbean Regional Technical Assistance Center


Creditor Committees


Capacity Development


The G20 Common Framework for Debt Treatments


Commonwealth Secretariat


Debt Management Facility


Democratic Republic of Congo


Debt Sustainable Analysis


Debt sustainability analysis massive open online course


Debt Service Suspension Initiative


European Bank for Reconstruction and Development


Eastern Caribbean Currency Union


Emerging Markets


Environmental, Social, and Governance


Fragile and conflict-affected States


Foreign Direct Investment


Financial Soundness Indicators


High Frequency Phone Surveys


Heavily Indebted Poor Countries


Information and Communication Technologies


Independent Evaluation Office of the IMF


International Development Association


Junior debt managers program


Local currency bond markets


Low-income Countries


Market Access Countries


Multilateral Development Banks

Macroeconomic and Financial Management Institute of Eastern and Southern Africa


Medium-term debt management strategy

Medium-term debt management strategy massive open online course


Non-Paris Club


Non-performing Loans


Official Development Aids


Paris Club


Pacific Financial Technical Assistance Centre


Papua New Guinea


Public-private partnerships


Poverty Reduction and Growth Trust


Rapid Credit Facility


Rapid Financing Instrument


Resilience and Sustainability Trust


Regional Technical Assistance Centers




Sustainable Development Goals


Small Developing States


State-owned enterprises


Sovereign Risk and Debt Sustainability Framework




United Nations Educational, Scientific and Cultural Organization


United Nations International Children’s Emergency Fund


World Tourism Organization


World Economic Outlook


The list can be found in Annex I of the report.


At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country’s authorities. An explanation of any qualifiers used in summing up can be found here:

Macroeconomic Developments and Prospects in Low-Income Countries - 2022
Author: International Monetary Fund. Monetary and Capital Markets Department and International Monetary Fund. Strategy, Policy, & Review Department