September 21, 2021

Capital flows are beneficial to developing countries

2 min read

On May 5, 2017, Policy makers and senior officials from around Africa agreed that capital flows to developing countries are generally beneficial, particularly in the current context of a much leaner environment.

According to a press release by the IMF, the participants at the IMF hosted conference in Livingstone, Zambia, noted that capital flows provide an important source of financing for investments and help to maintain foreign exchange reserves.

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Hon. Felix Mutati, Minister of Finance of Zambia.

Hosted on the theme “Managing Capital Flows: Challenges for Developing Countries” the participants also agreed that sound policies and macroeconomic stability are key to help reignite high-quality capital flows.

Some lessons drawn from the shared experience of participants are that (i) the composition of capital flows matters for financial stability and growth, and (ii) that effectively managing the inflow phase of the capital flow cycle is the best protection against challenges that arise when capital flows reverse.

The Hon. Felix Mutati, Minister of Finance of Zambia, and David Lipton, First Deputy Managing Director of the IMF, opened the conference. Paul Krugman, Nobel laureate and Distinguished Professor of Economics at the City University of New York, delivered a keynote address.

Capital flows to many developing countries have recently declined because of low commodity prices and weak growth. The conference provided a forum for policy makers to share experiences on how best to reap the benefits from capital flows, while managing the risks.

Speakers on the program included policy makers and senior officials from Cameroon, Chile, India, Kenya, Mozambique, South Africa, and Zambia, as well as distinguished academics, economic analysts, and market participants. Also in attendance were senior officials from other developing and emerging market countries.

 

 

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