Poor Countries Struggle due to Lower Commodity Prices

Author: Sachin Diraviam

Published:

Many of the world’s poorest countries have been struggling as of late in terms of growth. This is due largely in part to a strong dollar, which makes it harder for other countries to pay back the U.S. “Many impoverished country governments are being hit by the fall in prices for the commodities they export, and large depreciations of currencies against the dollar,” said Tim Jones, economist at the Jubilee Debt Campaign. This means many of the countries who rely on exporting world commodities are being hurt in multiple ways recently. This is because both the strong dollar and the dropping prices of these commodities are driving their development budgets into the ground. An example of this is in Sierra Leone, where the price of iron ore dipping as well as the Ebola breakout have hampered the country’s ability to develop. The World Bank will be dealing with an increase in loan requests due to the fall of commodity prices as well.

From now until June, it is projected that lending from the International Bank for Reconstruction and Development will range from 25-30 Billion Dollars, which would be the most since the financial crisis of 2008. This increase in loans hopes to allow the struggling countries to continue to grow and prosper. “Such lending has prompted criticism that the World Bank is at risk of encroaching on the IMF’s crisis-response role, and that it is in effect enabling governments to avoid making the tough political decision to turn to the IMF for assistance.” This quote from an FT article states how the Word Bank putting out these loans will not conflict with the IMF, the organization in charge of handling financial crisis situations. The countries receiving these loans will use the money to invest in their infrastructure as well as relief operations in countries that have been struck by the Ebola Crisis.