Updated April 20th, 2024 at 16:37 IST

IMF shareholders acknowledge urgency in tackling low-income nations' debt burdens

The IMF lowered its 2024 growth forecast for low-income countries as a group to 4.7% from an estimate of 4.9% in January.

Reported by: Business Desk
IMF | Image:Shutterstock
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IMF's worries: The International Monetary Fund (IMF) has expressed its concern over the debt and fiscal challenges confronting low-income nations. According to IMF Managing Director Kristalina Georgieva, shareholders have recognised the importance of addressing these issues, particularly as many low-income countries struggle with unsustainable debt levels.

In recent reports, both the IMF and the World Bank have highlighted the economic difficulties faced by low-income developing countries, exacerbated by the lingering effects of the COVID-19 pandemic and other shocks. The IMF has revised its growth forecast for low-income countries in 2024 downward to 4.7 per cent, down from the previous estimate of 4.9 per cent in January. 

Meanwhile, the World Bank noted a concerning trend where half of the world's 75 poorest countries are experiencing a widening income gap with wealthier economies, marking a reversal in development progress seen earlier this century.

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IMF's support enhancement

Georgieva stressed the IMF's commitment to boost support for low-income countries hit the hardest by recent crises. Measures include a 50 per cent quota share increase and additional resources allocated to the Poverty Reduction and Growth Trust. Internal reforms within the IMF aim to streamline the debt restructuring process, ensuring a more efficient resolution.

High debt levels, particularly in Sub-Saharan Africa, are posing significant challenges, with countries now facing much higher debt service payments compared to a decade ago. Georgieva stressed the importance of increasing domestic revenues through taxation, controlling inflation, reducing spending, and fostering local capital markets. She also highlighted the need for these countries to attract investors, with the IMF actively engaged to facilitate this process.

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Debt framework proposal

Some advocates, like Iolanda Fresnillo from the European Network on Debt and Development, have called for a new multilateral legal framework overseen by the United Nations to address sovereign debt issues comprehensively. This proposed framework would consider factors such as climate change, environmental degradation, and human rights.

US Treasury Undersecretary Jay Shambaugh raised concerns about the role of emerging official creditors, urging them not to reduce lending to low-income countries while international financial institutions are providing support. He noted that external public debt outflows increased in 2022 and likely worsened in 2023.

Overall, the IMF and other stakeholders are actively working to address the pressing challenges faced by low-income countries.

(With Reuters Inputs)

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Published April 20th, 2024 at 16:37 IST