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Financing for Low-Income Countries, Collateral Damage of Global Imbalances

Author

Listed:
  • Edouard Mien

    (FERDI - Fondation pour les Etudes et Recherches sur le Développement International)

  • Bulbul Butail

    (FERDI - Fondation pour les Etudes et Recherches sur le Développement International)

  • Bruno Cabrillac

    (FERDI - Fondation pour les Etudes et Recherches sur le Développement International)

Abstract

Low-income countries (LICs) play a limited role in global macroeconomic imbalances, as measured by current accounts, that is, the savings/investment equilibria, external positions, and their financing. However, they are disproportionately affected by their consequences. These imbalances have contributed to the increasingly important role of East Asia, especially China, in global value chains. This rise of East Asia's influence has further reinforced raw materials-based economic setups in most LICs, particularly in Africa, preventing manufacturing-led development, increasing their vulnerability and restricting their long-term growth potential. Moreover, global current account surpluses primarily finance U.S. deficits at the expense of countries that are "natural" capital importers, primarily LICs. This report analyzes recent trends in LICs' current account deficits and their financing, with a focus on African LICs.

Suggested Citation

  • Edouard Mien & Bulbul Butail & Bruno Cabrillac, 2026. "Financing for Low-Income Countries, Collateral Damage of Global Imbalances," Working Papers hal-05698422, HAL.
    • Handle: RePEc:hal:wpaper:hal-05698422
    Note: View the original document on HAL open archive server: https://hal.science/hal-05698422v1
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