GS Analyst: Daily Current Affairs

The global economy, despite facing unprecedented shocks, has exhibited remarkable resilience, with inflation waning and economies performing better than anticipated. However, amidst this positive outlook, the plight of the 75 poorest and most vulnerable economies, eligible for grants and low-interest loans from the World Bank’s International Development Association (IDA), remains largely unnoticed.

Challenges Faced by IDA Countries:

• Economic Reversal: IDA countries, home to a quarter of humanity, are experiencing a historic economic reversal amidst overlapping crises, pre-pandemic vulnerabilities, and wider issues such as climate change and conflict. By the end of 2024, these countries are expected to have witnessed the weakest half-decade of growth since the early 1990s.
• Income Convergence Stagnation: Despite global growth trends, income convergence relative to advanced economies has stalled, and one in three IDA countries is now poorer than before the pandemic. Extreme poverty rates are eight times higher in these nations, and half are either in debt distress or at high risk.
• External Challenges: Rising conflict and violence, coupled with escalating investment needs to address climate change vulnerabilities, exacerbate the challenges facing IDA countries. Stagnant growth projections highlight the risk of prolonged economic stagnation.

Unlocking Potential through Investment:

• Harnessing Demographic Dividends: With growing working-age populations and significant natural resource endowments, IDA countries possess untapped potential. Effective management of resources and investments in healthcare and education are vital to capitalize on demographic dividends.
• Fostering Stability and Growth: Investment growth in IDA countries has been weak, necessitating comprehensive policy reform packages to enhance fiscal stability, macroeconomic resilience, and structural reforms. Both public and private investments, coupled with quality infrastructure, are imperative for sustainable growth.
• International Cooperation: Enhanced international financing and cooperation are essential to complement IDA countries’ policy efforts. Addressing global challenges such as climate change, trade, debt restructuring, food insecurity, and conflict resolution is crucial for fostering an enabling environment for IDA countries to thrive.

Investment in IDA countries is not only a matter of economic development but also a global imperative for long-term peace and prosperity. By addressing their economic challenges, harnessing demographic dividends, and fostering international cooperation, these nations can unlock their potential and contribute to global objectives. It is imperative for the global community to prioritize support for IDA countries, ensuring a brighter future for all.