“For many of these countries, the challenges are numerous,” warned a blog co-authored by Georgieva and Ceyla Pazarbasioglu, director of strategy, policy and review at the IMF.
“Unless G20 creditors agree to accelerate debt restructuring and stop debt repayment during restructuring negotiations, the economy could collapse in some countries,” they said.
International Monetary Fund Prime Minister Christalina Georgieva recently warned that poor countries could witness an economic collapse unless the richest countries step up debt relief. Georgieva and colleagues say that about three-fifths of low-income countries are already in debt crisis, or at high risk, compared to less than half of 2015.
The G20 Group launched the Debt Suspension Initiative (DSSI) last spring, proposing to temporarily freeze payments to low-income countries that were already facing heavy debt burdens prior to the pandemic. But it will be over by the end of the year. Another G20 plan, a common framework for debt processing designed to mitigate the overall debt burden of poor countries, is also very slow.
“Recent experience in Chad, Ethiopia and Zambia shows that a common framework for debt processing beyond DSSI must be improved,” the author wrote.
There were many reasons for this. Coordinating the Paris Club and other creditors, as well as multiple government agencies and agencies within the creditors, slowed decision-making. In the case of Chad, the need to restructure large collateralized obligations owned by private companies and partially syndicated to numerous banks and funds complicates progress.
“It is also important for private sector creditors to provide debt relief on equal terms,” the author writes.
“No doubt 2022 will be much more difficult due to the imminent international financial situation,” the blog added.
Fiber2Fashion News Desk (DS)
Poor countries may face “economic collapse” G20 debt relief None: IMF
Source link Poor countries may face “economic collapse” G20 debt relief None: IMF