The economic crisis: And the biggest loosers are...

According to the IMF (International Monetary Fund), the global financial crisis will significantly worsen the budgetary position of many Low Income Countries (LIC) governments up to the level where they will need international aid to be able to survive the crisis.

Why are LIC countries particularly vulnerable? Because they don't have a buffer more developed countries have...

On one hand, government revenues are expected to suffer as economic activity slows and commodity prices fall. Potential declines in donor support and tighter financing conditions will likely impose further pressures on their budgets.

On the other hand, many countries will need to increase spending to protect the poor, and additional spending pressures may arise from currency depreciation and rising interest rates, which could raise debt service costs.

The most vulnerable countries are: Albania, Angola, Armenia, Burundi, Central African Rep., Congo DRC, Côte d'Ivoire, Djibouti, Ghana, Haiti, Honduras, Kyrgyzstan, Laos, Lesotho, Liberia, Mauritania, Moldova, Mongolia, Nigeria, Papua New Guinea, St. Lucia, St. Vincent & Grenadines, Sudan, Tajikistan, Vietnam and Zambia.

Baseline projections for 2009 foresee a total balance of payments shock of US$165 billion for these countries. They will need at least US$25 billion of financial assistance to offset the impact of the shock on their international reserves. The needs could be much larger — approaching US$140 billion in a “bad case” scenario. (The full IMF report)