Christine Lagarde said the downside risks to global growth have increased markedly at a time when the capacity of many low-income countries to absorb further shocks has yet to be re-built from the last two crises.
International Monetary Fund (IMF) Managing Director Christine Lagarde, on Wednesday said the renewed surge in commodity prices this year could plunge an additional 44 million people into poverty.
"The food and fuel crisis of 2008 and the global financial crisis that followed have been devastating for the poor. And this year, we have seen a renewed surge in commodity prices that could plunge an additional 44 million people into poverty," Lagarde said in her opening remarks at a high-level IMF seminar on 'Commodity Price Volatility and Inclusive Growth in Low-Income Countries'.
Lagarde said the downside risks to global growth have increased markedly at a time when the capacity of many low-income countries to absorb further shocks has yet to be re-built from the last two crises.
"Once again, the low-income countries find themselves at a critical juncture. What policies are needed at this challenging time? And how best to rebuild resilience to future shocks?", she questioned.
In the face of a more uncertain global environment, policymakers in low-income countries -- as in many others --should be prepared to adapt policies according to country-specific circumstances, she said.
"In the event of a sharp downturn, the key will be to protect vital spending -- to mitigate the impact on growth and to protect the most vulnerable. Because the scope for counter-cyclical fiscal policy has become more limited, monetary and exchange rate policy could be used more actively -- provided that inflation is moderate," she noted.
Lagarde named three key steps, including "self-insurance" during good times, strengthening social safety nets and structural change, to boost longer-term resilience.
"Economies that are more diversified -- and not overly dependent on a few products and trading partners -- are better able to withstand shocks," she said.