The chiefs of the world’s main international finance agencies have issued a warning about unprecedented global debt levels, with the director of the International Monetary Fund claiming that choices for dealing with billions owed by impoverished countries are dwindling.
In an online chat with World Bank President David Malpass on Tuesday, Kristalina Georgieva stated, “We see the situation for many nations becoming worse, and the means to deal with this problem are diminishing.” “The debt situation is becoming increasingly obnoxious.”
Both organisations have been warning about the dangers of growing debt levels in emerging nations for months, especially as interest rates begin to rise to slow rapid inflation. According to the World Bank, the poorest nations, whose economy have been devastated by the pandemic, would owe $35 billion in payments by 2022.
After the Group of 20 major nations’ respite on debt-service payments for approximately 70 troubled countries — in effect since May 2020 — expires at the end of 2021, the need to avoid what Georgieva has called “economic collapse” for some countries is mounting.
The Common Framework, a strategy devised by the G-20 in late 2020 to restructure the debt of nations facing default, has been approved. hampered by a lack of coordination, transparency and clarity.
Both organisations have been warning about the dangers of growing debt levels in developing nations for months, especially as interest rates begin to rise in an attempt to slow galloping inflation. The epidemic has destroyed the World Bank’s omies, who will owing $35 billion in payments by 2022.
After the Group of 20 largest nations’ respite on debt-service payments for approximately 70 troubled countries — in effect since May 2020 — expires at the end of 2021, the pressure to avoid what Georgieva has called “economic collapse” for some countries has grown.
The Common Framework, a strategy devised by the G-20 in late 2020 to restructure the debt of nations in default, has been approved.
Unlike the previous two G-20 meetings, which were used to assess the progress of debt relief initiatives and discuss the need for changes, this week’s gathering of finance ministers and central bankers at the IMF and World Bank spring meetings is expected to be dominated by a discussion of Russia’s invasion of Ukraine.
According to Malpass, the World Bank has had “significant success” in the last year in assisting nations in converting floating-rate debt to fixed-rate instruments as interest rates rise internationally. He stated that this will “assist a little bit.”
The $35 billion owing this year by the world’s poorest countries — those eligible for aid through the bank’s International Development Association — is split between bilateral and private lenders.
“On that front, there needs to be relief – some of the official creditors have substantial sums due, and that needs to be taken into account when interest rates rise,” Malpass said. “It just adds to the urgency of the situation.”
