IMF Chief Urges G20 To Move Faster On Debt Relief
Advanced nations should “immediately” provide relief to developing nations whose debt burdens have swelled due to the Covid-19 pandemic, IMF Managing Director Kristalina Georgieva said Wednesday.
In a message to Group of 20 finance ministers and central bankers gathering in Jakarta this week, the IMF chief renewed her call for urgent action from creditors, warning of dire consequences if they fail to do so.
“We estimate that about 60 percent of low-income countries are in or at high risk of debt distress, double 2015 levels,” Georgieva said in a blog post.
“These and many other economies will need… more grants and concessional financing, and more help to deal with debt immediately.”
During the Covid-19 pandemic, the G20 put in place the Debt Service Suspension Initiative to help countries that ramped up borrowing to deal with the twin health and economic crises, but that program ended in December.
The G20’s Common Framework meant to offer a way to restructure large debt loads remains subject to uncertainty, and only three countries — Chad, Ethiopia and Zambia — have requested a negotiation under its terms.
Georgieva echoed the IMF’s sister institution, the World Bank, calling for officials to take additional steps including “reinvigorating” the common framework, beginning with “a standstill on debt service payments during the negotiation under the framework.”
She also called for the program to be extended “a wider range of highly indebted countries.”
A key sticking point in the debt restructuring process is the lack of accurate information about borrowing levels, especially loans from China.
The Washington-based crisis lending institutions have called for greater transparency, including on the debts of private firms in those countries.
Addressing the debt will be especially critical as rising inflation has prompted a “policy pivot” by central banks in advanced economies which are raising interest rates, which in turn will put more pressure on borrowers.
Georgieva cautioned that if “financial conditions tighten suddenly, emerging and developing countries must be ready for potential capital flow reversals.”
She said authorities may have to intervene in foreign exchange markets to deal with shocks, and even impose measures to contain the exodus of capital.
Georgieva stressed that beating Covid-19 worldwide remains critical to ensuring the economic recovery, noting the IMF projects “cumulative global output losses from the pandemic of nearly $13.8 trillion through 2024.”
“Ending the pandemic will also help address the scars from economic long-Covid,” caused by business disruptions and time lost by students.