Economic Growth

Countries hurt by war and fragility need strong global partnerships and resources

Fragile and conflict-affected states, home to 1 billion people across more than 40 countries, are at particular risk in this era of economic uncertainty.

Fragile and conflict-affected states, home to 1 billion people across more than 40 countries, are at particular risk in this era of economic uncertainty. Image: Unsplash/jordymeow

Jihad Azour
Director of the Middle East and Central Asia Department, International Monetary Fund
Franck Bousquet
Deputy Director, IMF
Abebe Aemro Selassie
Director, African Department, International Monetary Fund
Share:
Our Impact
What's the World Economic Forum doing to accelerate action on Economic Growth?
The Big Picture
Explore and monitor how Economic Progress is affecting economies, industries and global issues
A hand holding a looking glass by a lake
Crowdsource Innovation
Get involved with our crowdsourced digital platform to deliver impact at scale
Stay up to date:

Economic Progress

  • Conflict-affected states are at high risk in this era of economic uncertainty, having already had to contend with the pandemic and the impacts of Russia’s war on Ukraine.
  • Sub-Saharan Africa has been hit particularly hard, with consumer prices up more than 20% while public debt is approaching levels not seen since the early 2000s.
  • Consensus is growing that international financial institutions should play a key role in stabilizing fragile and conflict-affected economies and helping foster inclusive growth.
  • The IMF has set up a series of programs to support these economies.

Fragile and conflict-affected states, home to 1 billion people across more than 40 countries, are at particular risk in this era of economic uncertainty.

After struggling with poverty, low-capacity institutions, governance challenges, violence, and other risks for decades, these countries must now contend with the scars of the pandemic and Russia’s invasion of Ukraine. Accordingly, the international community must work together to help ensure their stability as a global public good—or else spillover effects associated with fragility and conflict become even more disruptive.

The pandemic has had a lasting economic impact, with income per capita in fragile states projected not to recover to 2019 levels until 2024. Russia’s war in Ukraine and its related spillovers, including on food and energy prices, further aggravated the situation.

Sub-Saharan Africa, home to about half of countries in the FCS category, has been hit particularly hard. Consumer prices have increased by more than 20 percent on average last year, while public debt is approaching 60 percent of gross domestic product—a level not seen since the early 2000s. We forecast that economic growth in seven countries—Burkina Faso, Central African Republic, Comoros, Eritrea, Mali, Nigeria, and Zimbabwe—will be below the regional average of 3.6 percent last year. In addition, 123 million people, or 12 percent of the region’s population, face acute food insecurity, equivalent to two-thirds of the worldwide total.

FCS in the Middle East and North Africa—more than one-third of the countries in the region—confront lingering effects from the pandemic and higher food and energy prices. Growth has remained sluggish at less than 1 percent, while per capita GDP continues to decline. Consumer prices are projected to rise by more than 30 percent on average last year and inflation will remain in double digits in 2023. Public debt as a share of GDP is forecast above 60 percent. As a result, FCS are facing very difficult trade-offs between rising spending needs, the difficulties in raising extra revenue, and elevated debt levels Vulnerable countries in the region also face food insecurity and social and political instability.

Conflict has returned even to regions considered to be more stable. According to the United Nations, Russia’s war in Ukraine increased the number of forcibly displaced people to 100 million. The influx of almost 8 million Ukrainian refugees in neighboring European countries requires governments to cope with short-term fiscal costs amid already tight budget constraints, and make policy decisions about labor market integration and access to social services.

These challenges are well-known in Africa and the Middle East, where policymakers contend with refugee flows and other regional impacts of fragility and conflict with few resources at hand. In this context, we should prioritize three ways to move these countries and their neighbors from fragility to stability and resilience.

Loading...

Tailored multilateral engagement

First, the international community must support countries under stress, even in the toughest situations. This is especially important in places such as the Sahel, where overlapping security, humanitarian, and economic crises threaten to undermine country institutions at risk of state collapse. Consensus is growing that international financial institutions must remain engaged and play a key role in stabilizing fragile and conflict-affected economies and helping foster inclusive growth.

In 2022, the African Development Bank updated its fragile states strategy, and the European Investment Bank adopted its first. The World Bank and the Asian Development Bank have taken similar steps since 2020.

In March, the IMF launched its Strategy for Fragile and Conflict-Affected States to strengthen our efforts to deliver more robust support to FCS, tailored to the constrained policy space in these countries.

The IMF is supporting FCS in several ways. For example, Mozambique’s program supports vulnerable households through cash transfers, including people forcibly displaced by conflict in the North. We support Somalia's efforts to rebuild key economic institutions and foster stability and growth, including through forthcoming debt relief under the Heavily Indebted Poor Countries Initiative with the World Bank. And we provide Yemen with policy advice to help stabilize its economy and reduce food insecurity.

Financing is key

The second priority is expanding the scale of financing to match the challenges ahead. Our contributions are part of broader efforts, and we have been supporting global initiatives to cushion the impact on those countries most exposed to risks. During the pandemic, FCS received $14.3 billion in IMF financing and an additional $26 billion from 2021's IMF general allocation of special drawing rights.

In addition, the Fund recently set up the Resilience and Sustainability Trust , which will provide longer-term affordable financing to address structural challenges such as those brought about by climate change, and which is a potential additional source of financing for eligible FCS.

In September, the IMF’s Executive Board approved the new Food Shock Window to help countries faced with food cost-related balance of payment problems. Our policy advice, capacity development assistance, and financial support are coordinated with our international partners.

Addressing fragility is a global public good

Finally, it is essential to recognize that fragility evolves. Several middle-income countries are now facing intense challenges due to spillovers from conflicts in neighboring countries. Scaled-up support from the international community to countries providing a global public good, including by opening their borders to refugees, is therefore critical.

In recent years, multilateral development banks have enhanced their assistance—including through concessional financing to middle-income countries affected by spillovers from fragility and conflict, such as Colombia, Ecuador, Jordan, Lebanon, and, more recently, Moldova. These actions underscore how multilateral institutions can help countries better address regional and global challenges.

In an increasingly fragmented world, we can only respond effectively by joining forces to manage interconnected risks. For the international community, this means strengthening its social contract with the most vulnerable countries which cannot absorb these shocks alone.

Discover

How has the World Economic Forum helped initiate a more effective response to natural disasters and humanitarian crises?

Have you read?
Don't miss any update on this topic

Create a free account and access your personalized content collection with our latest publications and analyses.

Sign up for free

License and Republishing

World Economic Forum articles may be republished in accordance with the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International Public License, and in accordance with our Terms of Use.

The views expressed in this article are those of the author alone and not the World Economic Forum.

Related topics:
Economic GrowthFinancial and Monetary SystemsResilience, Peace and SecurityTrade and Investment
Share:
World Economic Forum logo
Global Agenda

The Agenda Weekly

A weekly update of the most important issues driving the global agenda

Subscribe today

You can unsubscribe at any time using the link in our emails. For more details, review our privacy policy.

What is needed for inclusive and sustainable global economic growth? Four leaders share their thoughts 

Liam Coleman

May 24, 2024

About Us

Events

Media

Partners & Members

  • Join Us

Language Editions

Privacy Policy & Terms of Service

© 2024 World Economic Forum