External Imbalances in Low-Income Countries Within a Global Context: An Obstacle to Development 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. [...]