The IMF warns of the collapse of the economies of poor countries due to the debt burden

Major central banks such as the US Central Bank could cause more problems, as they prepare to unwind monetary easing.

IMF Managing Director Kristalina Georgieva warned -yesterday Thursday – that poor countries may face An economic collapse, unless the richest countries in the world agree to intensify efforts to relieve their debt burdens.

About 60 percent of low-income countries are already debt-burdened, or at high risk, compared to less than half in 2015.

“Challenges are rising for many of these countries,” Georgieva and Bazaar Bashioglu warned.

“We may witness an economic collapse in some countries, unless the G20 creditors agree to accelerate debt restructuring and suspend debt service while negotiating the restructuring,” they said.

The Group of 20 major economies launched the Debt Service Suspension Initiative in the spring of 2020, which aims to temporarily freeze payments for low-income countries, many of which already faced heavy debt burdens prior to the outbreak of the COVID-19 pandemic. However, this initiative will expire by the end of the year.

Too slow in decision making

Very slow progress has been marred by another G-20 plan, the Common Debt Management Framework, which aims to reduce the overall debt burden of poor countries.

“Recent experiences of Chad, Ethiopia and Zambia show that the joint framework for debt management must be improved beyond the debt service suspension initiative,” Georgieva and Bazar Bashioglu wrote, acknowledging that the joint framework has yet to deliver on its promises.

There are many reasons for this. Coordination between the Paris Club and other creditors as well as various government institutions and agencies within the creditor countries has slowed down the decision-making process.

“It is also very important that private creditors implement debt relief on similar terms,” ​​Georgieva and Pazar Bashioglu wrote.

Meanwhile, major central banks such as the US central bank could cause more problems as they prepare to unwind monetary easing.

“There is no doubt that 2022 will be more difficult, as monetary tightening looms globally,” they wrote.

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