IMF underlines critical need to bolster global debt architecture

The IMF chief’s comments at the G20 meeting under India’s presidency come in the backdrop of the South Asian nations of Sri Lanka, Bangladesh and Pakistan seeking urgent funds

IMF Managing Director Kristalina Georgieva leaves the convention centre at the G20 finance ministers’ meeting venue on the outskirts of Bengaluru, India on February 25, 2023. | Photo Credit: Reuters

Sovereign debt vulnerabilities, already elevated before the pandemic, have been exacerbated by the shocks stemming from COVID-19 and Russia’s war against Ukraine, and the international community must now come together to find solutions for the most vulnerable members of the global family, International Monetary Fund (IMF) Managing Director Kristalina Georgieva said on Saturday.

“This calls for urgent action to strengthen the international financial architecture, especially in the area of debt resolution and strengthening the global financial safety net,” Ms. Georgieva said at a meeting of the G20 Finance Ministers and Central Bank Governors. This was particularly the case for developing and low-income countries with very limited policy space and huge development needs, she pointed out.

The IMF chief’s comments at the G20 meeting under India’s presidency come in the backdrop of the South Asian nations of Sri Lanka, Bangladesh and Pakistan seeking urgent funds from the multilateral lender amid acute economic stress.

China, the world’s largest bilateral creditor, urged the group of big economies to conduct a fair, objective and in-depth analysis of the causes of global debt issues as clamour grows for lenders to take a large haircut, or accept losses, on loans, Reuters reported.

With global growth set to slow in 2023 and remain below its historical average, too many people in too many countries were struggling to make ends meet, the IMF chief cautioned.

“In light of rising debt vulnerabilities in many countries, I strongly endorse efforts to strengthen the debt architecture and improve the speed and effectiveness of debt resolution,” she added.

Observing that the IMF had approved $272 billion to 94 countries since the beginning of the pandemic, of which 57 were low-income countries, Ms. Georgieva said, the Fund as part of the Global Financial Safety Net, had been scaling up lending as members confronted the significant economic challenges that the past few years had brought.

The IMF had also stepped up its efforts to help tackle the global food crisis and several countries, including Malawi, Guinea, and Haiti, had benefited from its new Food Shock Window, she noted.

“In a world of great uncertainty and repeated turbulence, it is critical to further bolster the IMF’s capacity to support its members. Our common interest is to secure a well-functioning and integrated global economy,” she added.