IMF to G20: Poorer countries may collapse financially if they do not repay their debts

The poorest countries will face economic collapse unless the world’s richest economies agree to step up their debt restructuring efforts, International Monetary Fund (IMF) Managing Director Kristigalina G warned yesterday.

About 60% of low-income countries are already facing or at high risk of being severely pressured by their debt, compared to less than 50% in 2015, Georgieva wrote in a blog post with the help of Seila Pazarbasioglou, director for the Strategy, the Policy, but also the Evaluation of Departments at the IMF.

“For many of these countries, challenges are accumulating,” warned both Georgieva and Pazarbasioglu.

“We may see the economic collapse of some of these countries, unless the G20 creditors agree to speed up debt restructuring and suspend their service during the restructuring negotiations.”

The G20 Group of Developed Economies launched the Debt Consolidation Debt Initiative (DSSI) in the spring of 2020. The initiative was designed to provide a temporary freeze on payments for low-income countries, with several of these countries facing heavy liabilities. debt service before the pandemic.

However, this initiative expires at the end of the year.

Progress on another G20 plan, the Common Debt Management Framework designed to reduce the overall debt burden for poor countries, is very slow.

“The recent experiences of Chad, Ethiopia and Zambia show that the Common Debt Management Framework beyond the DSSI initiative needs to be upgraded,” the two IMF executives wrote, acknowledging that the Common Framework has not yet been proven. his real perspective.

The reasons for the delays are multiple. Coordinating Paris Creditors, as well as other creditors, as well as multiple government agencies and services, within creditor countries slows down the decision-making process.

In the case of Chad, who has to reorganize a debt obligation that involves financial security and is in the hands of a private company, but also in a number of banks and investment funds, the situation is more complicated.

“It is also important that private sector creditors proceed with debt restructuring on similar terms,” ​​the two IMF executives said.

Meanwhile, major central banks such as the US Federal Reserve are adjusting their lending policies, making the situation more complicated.

“There is no doubt that 2022 will have even more challenges to meet the international economic challenges looming on the horizon,” the same post said.

Source: AMPE