IMF Managing Director Kristalina Georgieva calls for freezing debt service for the low-income countries.
BRUSSELS, Feb 19 (The CONNECT) – Cautioning the world about ‘economic long COVID’, the International Monetary Fund (IMF) has called upon the G-20 nations to freezing debt service for the low-income countries and avoid “squeezing” a country precisely when it is under financial pressure.
Projecting the global economic losses due to the pandemic to be $13.8 trillion by the end of 2024, IMF Managing Director Kristalina Georgieva has called for a strong international cooperation and extraordinary policy agility, apart from broadening the efforts to combat ‘economic long COVID’.
In her statement to the virtual meeting of the G20 Finance Ministers and Central Bank Governors Ministers and Central Bank Governors, Georgieva noted that global economic indicators point to weaker growth momentum in 2022 due to the emergence of the Omicron variant and supply chain disruptions that are “more persistent than previously anticipated”.
While many countries are facing higher debt, “we should prioritize help to those countries who need a debt restructuring”, she said. The share of low-income countries at high risk or already in debt distress has doubled since 2015 – from 30 percent to 60 percent today, and several face the immediate need to restructure their debt,” the IMG chief told G-20 countries.
Pointing out that the G-20 Common Framework can play an important role, she called for efforts to make it even more impactful with “transparency and early action”.
She expressed the concern that inflation readings remain high in many countries, financial markets are more volatile, and geopolitical tensions have sharply increased. Even as the global economic recovery continues, its pace has moderated. Three weeks ago, we downgraded our global forecast to a still-healthy 4.4 percent – partially because of reassessment of growth prospects in the United States and China, Georgieva said.
Stating that strong international cooperation and extraordinary policy agility will be crucial to navigate a complex 'obstacle course' through 2022, the IMF chief said “our best course of action is to move from a singular focus on vaccines to ensuring that each country has equal access to a comprehensive COVID-19 toolkit that also includes tests and treatments”.
Omicron is a reminder that a durable and inclusive recovery is impossible while the pandemic continues, she observed and cautioned about the “great uncertainty about how effective the health protections that have been built will be in the face of other possible variants”.
Keeping these tools updated as the virus evolves will require continuous investment in medical research, disease surveillance, and health systems that help countries reach ‘the last mile’ in every community, she said and welcomed the World Bank’s announcement on mobilizing further toward reaching that goal.
Many countries, she pointed out, will need to navigate a tightening monetary cycle. In the context of a high degree of uncertainty and significant differences across countries, macroeconomic policies need to be carefully calibrated to individual country circumstances. The risk of potential spill overs, especially for emerging markets and developing countries, also needs to be managed, she said and stressed: “We must fight inflation without impairing the recovery.”
She called for providing clear and timebound processes that foster confidence and facilitate implementation, including participation of private creditors; and finding ways to bring in countries that are not currently covered by Common Framework by expanding is perimeter.
“More broadly, the G20 is crucial to sustain the momentum on collective efforts to deliver on global ambitions for the common good,” the IMF chief said. This includes focusing on amplifying the effect of the historic US$650 billion SDR allocation by channelling as much of it as possible to where the need is greatest.
In this context, she welcomed the G20 endorsement of our proposed new Resilience and Sustainability Trust (RST).