Falling commodity prices big challenge for poor countries

Almost three years into the sharp drop of global commodity prices, economic conditions have become very difficult for many of the world's 60 poorest countries - a group the International Monetary Fund refers to as "low-income developing countries" (LIDCs).

As discussed in a recent report by the IMF, the situation is particularly challenging for commodity-dependent countries, which have seen tax and export revenues shrink markedly in response to lower commodity prices. With commodity prices expected to remain subdued over the medium term, more decisive policy changes will be needed to restore macroeconomic stability. But policies must be designed to reduce the pains on the populations and preserve the longer-term growth prospects.

Fuel commodity exporters have been the hardest hit by the commodity price decline - with the effects being more marked where exchange rate adjustment has either been resisted (by central banks) or is ruled out as an option (because currencies are tied to the US dollar or the euro). On average, in fuel exporters the large drop in oil prices, together with spillovers to the non-oil economy, has pushed countries into recession and more than halved fiscal revenues.