IMF: Poor nations face economic collapse unless G20 extends relief

EUROPE |

International Monetary Fund (IMF) Managing Director Kristalina Georgieva. [Reuters, Yves Herman]

Poorer nations could be facing economic collapse unless the world's richest economies agree to step up debt relief efforts, International Monetary Fund (IMF) chief Kristalina Georgieva has warned.

Some 60 per cent of low income countries are already in or at high risk of debt distress, compared to less than half that in 2015, Georgieva wrote in a blog co-authored with Ceyla Pazarbasioglu, director at the IMF Strategy, Policy and Review Department.

"For many of these countries, the challenges are mounting," Georgieva and Pazarbasioglu warned.

"We may see economic collapse in some countries unless G20 creditors agree to accelerate debt restructurings and suspend debt service while the restructurings are being negotiated."

The G20 group of major economies launched the Debt Service Suspension Initiative (DSSI) in spring 2020, designed to offer a temporary freeze in payments to low-income countries, many of which had already faced hefty debt burdens pre-pandemic. However, that initiative is running out at the end of the year. Progress on another G20 plan, the Common Framework for Debt Treatments designed to reduce the overall debt burdens of poor countries, has been very slow.

"Recent experiences of Chad, Ethiopia, and Zambia show that the Common Framework for debt treatments beyond the DSSI must be improved," the authors wrote, acknowledging that the Common Framework had yet to deliver on its promise. "It is also critical that private sector creditors implement debt relief on comparable terms," the authors wrote.

 

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