IMF Shareholders Address Challenges Faced by Low-Income Countries
In a recent meeting, shareholders of the International Monetary Fund emphasized the importance of tackling the obstacles encountered by low-income countries, many of which are burdened by unsustainable debt levels, according to IMF Managing Director Kristalina Georgieva.
Alarming Economic Reports on Low-Income Developing Countries
Reports from the IMF and the World Bank highlighted concerning economic developments and prospects in low-income developing countries. These nations are still grappling with the aftermath of the COVID-19 pandemic and other shocks.
Revised Growth Forecast and Income Gap Concerns
The IMF adjusted its 2024 growth forecast for low-income countries to 4.7 percent, down from an earlier estimate of 4.9 percent. Meanwhile, the World Bank revealed that half of the world’s 75 poorest countries were experiencing a widening income gap with wealthier economies, marking a significant reversal in development trends.
IMF’s Efforts to Support Low-Income Countries
Georgieva stated that the IMF is enhancing its support for low-income countries impacted by recent shocks. This includes a 50 percent quota share increase and additional resources allocated to the Poverty Reduction and Growth Trust.
Debt Restructuring and Global Sovereign Debt Roundtable
Georgieva and Saudi Arabia’s Finance Minister Mohammed Al-Jadaan highlighted internal reforms within the IMF aimed at streamlining the debt restructuring process. The Global Sovereign Debt Roundtable hosted by the IMF and the World Bank made progress on setting timelines for debt restructurings and ensuring equal treatment for creditors.
Challenges Faced by Low-Income Countries
High debt levels continue to burden low-income countries, particularly in Sub-Saharan Africa where debt service payments have surged to 12 percent of revenues. Georgieva emphasized the need for these countries to boost domestic revenues, control inflation, reduce spending, and develop local capital markets to attract investments.
Call for Multilateral Legal Framework
Iolanda Fresnillo of the European Network on Debt and Development proposed a new multilateral legal framework for sovereign debt, similar to existing frameworks for tax cooperation. She emphasized the need to address climate change, environmental degradation, and human rights within a broader debt framework.
Concerns Raised by US Treasury Undersecretary
US Treasury Undersecretary Jay Shambaugh expressed concerns about the situation facing low-income countries, cautioning emerging official creditors like China against reducing loans to these nations while international financial institutions are providing support.