IMF warns crisis has shifted to poor countries

WASHINGTON (Reuters) – The International Monetary Fund on Tuesday warned that the global crisis had shifted to the world’s poorest nations and 22 countries may need as much as $25 billion in additional funding in 2009 to cope with the downturn.

The IMF said, based on its projections, the 22 countries could need up to $140 billion if global conditions were to deteriorate sharply.

“I foresee mounting problems for developing countries,” IMF Managing Director Dominique Strauss-Kahn said, calling it the “third wave” of the crisis, which has spread from financial and credit markets into the consumer economy.

He said he expected more countries to turn to the fund for financing and those with IMF aid packages to increase their borrowing.

“I’m expecting a number of new or scaled-up loan agreements will appear very soon,” Strauss-Kahn told the Brookings Institution, a Washington-based think tank. He made the comment during a discussion of the launch of a new IMF report, which looks at the impact of the crisis on low-income countries.

Under current IMF projections, a total balance-of-payments shock in 38 developing countries could amount to around $165 billion, and increase to as much as $216 billion under a worst case scenario.

The IMF said reserves in the 22 countries are expected to fall below three months of imports with losses amounting to $25 billion — equivalent to about 80 percent of annual aid to poor countries over the past five years.

Developing countries have been affected by falling demand for exports and a dramatic slowing in remittances from overseas workers as the economies of the United States and Europe have contracted. A sharp drop in foreign direct investment is expected in about half of all low-income countries.

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