Global Shocks Unfolding Lessons From Fragile And Conflict Affected States
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Global Shocks Unfolding: Lessons from Fragile and Conflict-affected States
Author: Jocelyn Boussard
language: en
Publisher: International Monetary Fund
Release Date: 2024-10-04
This paper investigates the consequences of global shocks on a sample of low- and lower-middle-income countries with a particular focus on fragile and conflict-affected states (FCS). FCS are a group of countries that display institutional weakness and/or are negatively affected by active conflict, thereby facing challenges in macroeconomic policy management. Examining different global shocks associated with commodity prices, external demand, and financing conditions, this paper establishes that FCS economies are more vulnerable to these shocks compared to non-FCS peers. The higher sensitivity of FCS economies is mainly driven by procyclical fiscal responses, aggravated by the lack of effective spending controls and timely access to financial sources. External financing serves as a source of stability, partially mitigating the adverse impact of global shocks. This paper contributes to a better understanding of how conditions of fragility, which are on the rise in many parts of the world today, can amplify the effects of negative exogenous shocks. Its results highlight the diverse nature of underlying sources of vulnerabilities, spanning from fiscal and external buffers to institutional quality and economic structure, with lessons applicable to a broader set of countries. Efficient and timely external financial support from external partners, including international financial institutions, should help countries’ counter-cyclical responses to mitigate adverse shocks and achieve macroeconomic stability.
Pushed to the Brink
Author: Ms. Wenjie Chen
language: en
Publisher: International Monetary Fund
Release Date: 2025-04-25
Sub-Saharan Africa is home to nearly half of the world’s fragile and conflict-affected states, where weak institutions and social cohesion, governance failures, and economic instability trap millions in poverty. Some countries have transitioned out of extreme fragility by implementing sound macroeconomic policies, diversifying the economy, and strengthening institutions. Sustaining these reforms, however, is challenging in the context of erratic growth, political instability, exposure to natural disasters, and heavy resource dependency—which tends to heighten vulnerability to price volatility and governance challenges. Meanwhile, weak domestic revenue mobilization and declining aid further hinder development. Without reforms and continued international support, fragility risks worsening regional instability and economic disruptions with global repercussions.
The 4th Financing for Development Conference-Contribution of the IMF to the International Financing for Development Agenda
Author: International Monetary Fund. Strategy, Policy, & Review Department
language: en
Publisher: International Monetary Fund
Release Date: 2025-06-05
The series of major economic shocks since 2020 has added to longstanding development challenges, with low-income and fragile countries affected the most. The negative economic impact of the COVID-19 pandemic, the spillovers from the war in Ukraine, and the tightening of international financial conditions after 2022 have added to preexisting structural obstacles weighing on economic and social progress in developing countries. While some of these factors have subsided since 2023, the escalation of trade tensions at the beginning of 2025, and the resulting impact on global growth and international financial conditions, including elevated uncertainty and significant downside risks weighing on the outlook, have again negative implications for most developing countries. In addition, natural disasters, climate and demographic challenges, geopolitical tensions, political instability, and conflicts, can be expected to add further to the challenges, even though some developments, including artificial intelligence and digitalization, may be beneficial. That said, while developing countries share many characteristics, increasing heterogeneity in their economic conditions and exposures to risks calls for appropriate differentiation in countries’ policy and reform agendas, as well as in the support from the international community. Particular attention must be paid to the situation of the poorest and fragile countries.