BUUMBA CHIMBULU writes
THE International Monetary Fund (IMF) and the World Bank have called for a one-year debt extension for emerging and developing economies under the Debt Service Suspension Initiative.
“We have to be mindful of debt levels that are high in many emerging and developing economies, high to a point of suffocating capacity to act,” says IMF Managing Director, Kristalina Georgieva.
Ms Georgieva also called for greater private sector participation for the suspension.
She said this in her speech at the Finance Ministers on Financing for Development in the Era of Covid-19 and Beyond event.
“We have had the Debt Service Suspension Initiative, a great achievement. It has to be extended and both the World Bank and the IMF are calling for a one-year extension. And we are calling for greater private sector participation,” she said.
Ms Georgieva observed the need for all cooperating partners to work in boosting the financing that was available to developing economies and for emerging markets with weaker fundamentals.
She said IMF had recognised that for some countries, this was not going to be enough as they would need a restructuring to bring debt down to a sustainable level.
“For the Fund, it means that we are expanding the use of existing Special Drawing Rights (SDRs), encouraging a shift from advanced economies towards developing economies so they can rely on strong financing capacity at the IMF on concessional terms.
“I call for debt transparency as a priority. If we know debt levels, then this issue is much easier to handle,” Ms Georgieva said.
She stressed the importance to maintain support until the world economy turned around.
Ms Georgieva said the IMF projected a recovery that was only partial and uneven.
“We are at a point when we can say that the world economy will lose US$12 trillion this year and next year.
“To continue support in advanced economies, is somewhat easier. With low interest rates, it is more affordable,” she said.