The International Monetary Fund (IMF) has expressed worry and raised concerns about a potential wave of debt restructuring requests and the challenges of handling them, as current restructuring cases face costly delays.
The IMF’s Managing Director, Kristalina Georgieva, has warned that approximately 15% of low-income countries are already in debt distress, with another 45% facing high debt vulnerabilities.
According to Director Georgieva, the situation in Zambia is the most recent example of a country struggling with debt, and Ghana is among those currently seeking an IMF-support program – but facing hurdles in securing an agreement with its bilateral creditors for debt restructuring.
Speaking ahead of the IMF/World Bank Spring Meetings, Georgieva stated that about a quarter of emerging economies, including Ghana, are at high risk and facing “default-like” borrowing spreads. In response to these concerns, she made a passionate appeal to richer countries to support weaker ones, stating that: “additional support from wealthier countries is essential. I would like to make a double plea on their behalf: help them handle the burden of debt, which was made so much harder by the shocks of the past years; and secondly, help ensure that the IMF continues to be in a position to support them in the years ahead.”
To help resolve this issue, the IMF, the World Bank, and India as G20 Chair recently established a Global Sovereign Debt Roundtable to help speed up restructuring cases, including those under the G20’s Common Framework.
The Roundtable brought together public and private creditors, as well as borrowers, to help reach consensus on standards and processes.
Kristalina Georgieva in her speech disclosed measures being put in place to ensure that IMF can continue providing vital support and catalyze financing from others.
“We have increased our interest-free lending more than four-fold to $24 billion since the beginning of the pandemic. Now, we are urgently calling on our wealthier members to help address fundraising shortfalls in our Poverty Reduction and Growth Trust.
““It is now more important than ever to step up cooperation—to strengthen the ropes that tie us together – on this issue and the full range of economic challenges we face. Only then can we climb these hills together.”
Managing Director, Kristalina Georgieva
IMF Provides $300m In New Financing For 96 Countries
The IMF has so far provided nearly $300 billion in new financing for 96 countries since the start of the Covid-19 pandemic.
The historic SDR allocation of $650 billion helped to boost member countries’ reserves.
According to the Managing Director, IMF precautionary facilities is provide an additional buffer to countries with strong economic fundamentals, “most recently, we provided one for Morocco,” she said.
“Through innovations in our toolkit – including the Food Shock Window, and the Resilience and Sustainability Trust, we are helping our members meet new challenges. We have also stepped-up support for vulnerable middle-income countries – including through a temporary increase in the amount members can borrow from the IMF. And we have provided new financing to countries such as Sri Lanka and Ukraine. This is precisely what the Fund is here to do: be a source of stability in turbulent times.”
Managing Director, Kristalina Georgieva
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