London, July 27 (HNA)—International Monetary Fund (IMF) Managing Director Kristalina Georgieva warned that low-income and vulnerable emerging market countries risk falling further behind.
“The unprecedented shocks over the past few years have taken a significant toll on low-income (LICs) and vulnerable emerging market countries. These countries are at risk of falling further behind,” said Georgieva at the third G20 Finance Ministers and Central Bank Governors meeting in Rio de Janeiro, Brazil.
According to the IMF analysts, LICs need 820 billion dollars over the next five years to cover their projected current account deficits and external debt repayments alone, she stated and said, “Add to this the $500 billion of external financing needed to accelerate growth and convergence with advanced economies.”
“We are proposing a three-pronged approach to mobilize a range of existing and new tools to help vulnerable countries meet their development needs” she said and went on as follows:
“First, countries need to implement reforms that reinvigorate growth and jobs, develop domestic financial markets to improve access to finance, and mobilize fiscal revenue in an equitable and sustainable manner. We know that two-thirds of financing needs will need to come from the countries themselves. This means relentless pursuit of reforms and resource mobilization.
“Second, we must address resolutely debt vulnerabilities in LICs. The median LIC is spending over twice as much on external debt service as a share of revenue than it did 10 years ago (14 percent at end-2023 from 6 percent 10 years earlier). So far, we have avoided a systemic debt crisis, and we have seen important progress on debt restructuring cases. The Common Framework is delivering, and the Global Sovereign Debt Roundtable is helping shape greater consensus. Yet more needs to be done, including to provide more predictability around the debt restructuring process and to expand the use of credit enhancements, debt buybacks, or other liability management operations to facilitate new inflows and reduce the cost of debt.
“Third, the international community must step up and the IMF will do its part. I am grateful to the G20 for their generosity in channeling SDRs to the IMF’s instruments for vulnerable countries—the PRGT (Poverty Reduction and Growth Facility) and the RST (Resilience and Sustainability Trust). Strong demand for IMF lending means that we have a strong income position and we have met our target for precautionary balances. Now we can deploy that income for the benefit of our emerging market and low-income members who rely on IMF financial support. We are reviewing our policy for charges and surcharges, and we are working to ensure that the PRGT is put on a sustainable footing.
“We must come together to help the countries that need us the most. By working together, we can avoid getting stuck in a low-growth and unequal world and create a better future for all.”