WASHINGTON DC
The International Monetary Fund warned of “economic collapse” in some low-income countries unless creditors in the world’s richest nations suspend debt-service obligations and help renegotiate new terms.
About
60% of the world’s poorest countries are at high risk or are already in debt
distress, double the share in 2015, IMF Managing Director Kristalina Georgieva
and Ceyla Pazarbasioglu, head of the fund’s strategy, policy, and review
department, said in a blog post this week.
With
the Group of 20’s debt-service suspension initiative expiring at the end of the
year and interest rates poised to rise, “low-income countries will find it
increasingly difficult to service their debts,” the IMF officials said. “We may
see economic collapse in some countries unless G-20 creditors agree to
accelerate debt restructurings and suspend debt service while the
restructurings are being negotiated.”
Covid-19
has dealt a major blow to world’s poorest countries, causing a recession that
could push more than 100 million people into extreme poverty, according to the
World Bank. The challenges are mounting with the discovery of the omicron
variant, which is driving a new wave of infections.
At risk
The
World Bank says the following nations are at high risk of overall debt
distress:
· Africa:
Cameroon, Cape Verde, Central African Republic, Chad, Djibouti, Ethiopia,
Gambia, Ghana, Guinea-Bissau, Kenya, Liberia, Malawi, Mauritania, Sierra Leone,
South Sudan, Togo, Zambia
·
Asia:
Afghanistan, Laos, Tajikistan
·
Island
nations: Haiti, Kiribati, Maldives, Marshall Islands, Micronesia, Papua New
Guinea, Samoa, St. Vincent and the Grenadines, Tonga, Tuvalu
Afghanistan
and Ethiopia are among the 30 nations at high risk of overall debt distress
while Grenada, Mozambique, Republic of Congo, Sao Tome and Principe and Somalia
are already experiencing it, according to the World Bank’s website.
The
G-20 debt plan, which took effect on May 1, 2020, has so far provided more than
$10.3 billion in relief to more than 40 eligible countries.
Georgieva
and Pazarbasioglu called for the G-20’s so-called common framework — a plan to
reorganize loans — to be “stepped up” to help poorer nations. The strategy has
been plagued by delays and a lack of interest from debtor countries since its
inception in November 2020. Only three of the 73 eligible countries — Chad,
Ethiopia and Zambia — have applied for the program.
The
expiration of the debt-service relief will force “participating countries to
resume debt service payments,” the IMF officials said. “Quick action is needed
to build confidence in the framework and provide a road map for helping other
countries facing increasing debt vulnerabilities.”
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