You are here: Home » International » News » Economy
Business Standard

'Much more decisive' action needed to deal with debt problems: IMF chief

She said creditors should adopt contractual provisions to minimize economic disruption, increase transparency and endorse a common framework agreed in principle by the G20 last week

Topics
International Monetary Fund | G20  | Kristalina Georgieva

Reuters 

International Monetary Fund Managing Director Kristalina Georgieva addresses the fall meetings of the International Monetary Fund and World Bank in Washington
International Monetary Fund Managing Director Kristalina Georgieva

The head of the Monetary Fund on Sunday called for significant steps to address the increasingly unsustainable debt burdens of some countries, urging creditors and debtors to start restructuring processes sooner rather than later.

IMF Managing Director said a six-month extension of the Group of 20 major economies' freeze in official bilateral payments would help low-income countries hammered by the Covid-19 pandemic, but more urgent action was needed.

"We are buying some time, but we have to face reality that there are much more decisive actions ahead of us," she told an online event hosted by the Group of Thirty former policymakers and academics, urging creditors and countries facing debt distress to start restructuring debts without delay.

"Doing too little too late is costly to debtors, costly also to creditors," she said, warning that global debt levels would reach 100% of gross domestic product in 2021, and the negative impact of sovereign defaults could quickly spread.

She said creditors should adopt contractual provisions to minimize economic disruption, increase transparency and endorse a common framework agreed in principle by the last week.

Georgieva's remarks come amid growing concern about sharp increases in debt levels, especially among low- and middle-income countries hard hit by the new coronavirus, a drop in tourism and in some cases, lower oil prices.

The Debt Service Suspension Initiative has helped 44 countries defer $5 billion to spend on mitigating the Covid-19 crisis, but its efficacy has been limited by the absence of private creditors and China's failure to include all state-owned institutions.

Many poorer countries have been reluctant to ask for a freeze in government bond payments, worried that doing so could harm their ability to borrow money in the future.

The G30 group, which includes former U.S. Treasury Secretary Larry Summers, last week urged the IMF to boost lending, tap its substantial gold reserves, and issue more of its Special Drawing Rights currency, a move akin to a central bank printing money that has been blocked by the United States.

Summers told the event the debt relief initiative was "a squirt gun meeting a massive conflagration," and more sweeping and coordinated action was needed by the world's rich nations.

"The global response has been a very small fraction of the actions proposed and advanced" during the global financial crisis in 2008-2009, he said. "History teaches us that there are countless errors of being too late for every error of being too early, and we are doing next to nothing internationally."

Dear Reader,


Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Sun, October 18 2020. 23:04 IST
RECOMMENDED FOR YOU
.