IMF boss calls for urgent action against rising levels of debt vulnerabilities in developing countries
The Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva, has made an impassioned plea for urgent action to be taken to address the rising levels of debt vulnerabilities in many countries around the world.
Speaking at the first meeting of the G20 Finance Ministers and Central Bank Governors in Bengaluru, India, Georgieva highlighted the need for the international community to work together to find solutions for the most vulnerable members of our global family.
Against a backdrop of slowing global growth, which is set to remain below historical averages for the foreseeable future, Georgieva commended the Government of India for its inspirational leadership of the G20 meetings, as she called for a strengthening of the international financial architecture. In particular, she stressed the need to improve debt resolution processes and strengthen the global financial safety net.
The Managing Director went on to highlight the fact that sovereign debt vulnerabilities, already elevated before the pandemic, have been exacerbated by the shocks stemming from Covid-19 and Russia’s war against Ukraine. This is particularly the case for developing and low-income countries with very limited policy space and huge development needs. Against this backdrop, Georgieva called on the G20 to strengthen the debt architecture, building on the success of the Debt Service Suspension Initiative (DSSI) and the Common Framework (CF) for debt resolution that were established last year.
While the CF delivered a debt operation for Chad, Georgieva highlighted the urgent need to complete Zambia’s debt restructuring, establish a Creditor Committee for Ghana, and advance work with Ethiopia. She also stressed the need for more predictable, timely, and orderly processes for countries under the CF and those not covered by it, including Sri Lanka and Suriname.
To enhance dialogue and collaboration on debt issues, Georgieva unveiled the new Global Sovereign Debt Roundtable (GSDR), which brings together creditors—official, old and new, and private—and debtor countries to discuss key issues that can facilitate the debt resolution process. The GSDR was launched under the auspices of India’s G20 presidency last week at the deputies’ level, followed by an engaged and constructive principals meeting earlier this week. Georgieva pledged to further build on this discussion during the World Bank-IMF Spring Meetings in April.
Turning to the issue of the global financial safety net, the Managing Director emphasized the IMF’s role at the center of this safety net, as it has been scaling up lending to help its members confront the significant economic challenges of the past few years. Through its standard lending facilities and emergency financing, the IMF has approved $272 billion of financing to 94 countries since the beginning of the pandemic, of which 57 are low-income countries.
The IMF has also stepped up its efforts to help tackle the global food crisis, with several countries benefiting from its new Food Shock Window, including Malawi, Guinea, and Haiti, and more expected to do so. In addition, the new Resilience and Sustainability Trust (RST) is providing long-term affordable finance to help members implement strong climate policies and catalyze additional financing. So far, four RST-supported programs have been approved by the IMF’s Executive Board: Costa Rica, Barbados, Rwanda, and Bangladesh. With many more RST requests expected, Georgieva called on IMF members for further pledges to channel Special Drawing Rights (SDRs) to the trust.
Georgieva stressed the urgent need to bolster the IMF’s capacity to support its members in a world of great uncertainty and repeated turbulence. This applies most urgently to the concessional financing for low-income countries through the Poverty Reduction and Growth Facility (PRGT), which has seen demand reach unprecedented levels. Georgieva called for an increase in PRGT loan and subsidy resources to meet this demand. A successful quota review, which the
