The IMF has called for urgent action and ambitious reforms to prevent a much more pronounced debt crisis in some of the world’s poorest countries, underscoring its concerns that many emerging economies will struggle following the Covid-19 pandemic.
IMF managing director Kristalina Georgieva warned there was a risk of a spate of sovereign bankruptcies unless temporary debt relief measures put in place earlier this year are extended and sovereign debt contracts and processes are overhauled.
“No debt crisis has happened yet thanks to decisive policy actions by central banks, fiscal authorities, official bilateral creditors and international financial institutions in the early days of the pandemic,” she wrote in a blog post published on Thursday and co-authored by her colleagues Ceyla Pazarbasioglu and Rhoda Weeks-Brown. “These actions, while essential, are fast becoming insufficient.”
Ms Georgieva urged the G20 group of leading nations to extend its freeze on bilateral government loan repayments for low-income countries until 2021, and warned that a failure to do so could result in widespread economic pain.
The scheme, which has been criticised for failing to secure the involvement of private creditors, is set to expire at the end of the year.
Many countries have already…