Kristalina Georgieva
The International Monetary Fund has raised concerns over a potential wave of debt restructuring requests and its handling at a time current restructuring cases are facing costly delays, adding “Zambia being the most recent example”.
According to its Managing Director, Kristalina Georgieva, about 15% of low-income countries are already in debt distress and another 45% face high debt vulnerabilities.
Ghana is one of these countries and is presently seeking an IMF-support programme, but facing a hurdle to secure agreement with its bilateral creditors for a debt restructuring.
Speaking ahead of the IMF/World Bank Spring Meetings, Madam Georgieva said about a quarter of emerging economies including Ghana are at high risk and facing “default-like” borrowing spreads.
She therefore made a passionate appeal to richer countries to support weaker countreis.
“Yet, for the weakest members of our global family, 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 put in place a Global Sovereign Debt Roundtable. It brought together public and private creditors, as well as borrowers, to help reach consensus on standards and processes—so it can speed up restructuring cases, including those under the G20’s Common Framework.
Kristalina Georgieva said “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.
According to her, this is critical to ensure that the IMF can continue to provide vital support and help catalyze financing from others.
“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”, she added.
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.
Madam Georgieva said “our precautionary facilities provide an additional buffer to countries with strong economic fundamentals—most recently, we provided one for Morocco”.
“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”, she explained.
She added “this is precisely what the Fund is here to do: be a source of stability in turbulent times”.
