Home Business framework Faster debt relief needed as more countries seek help, says IMF’s Gopinath

Faster debt relief needed as more countries seek help, says IMF’s Gopinath

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More countries are likely to seek debt relief because a stronger dollar makes repayments more difficult, and the agenda rich countries have to help poorer ones needs to be faster and broader, the deputy chief said. of the International Monetary Fund.

About 60% of low-income countries are at high risk or already in debt distress, and about 20 emerging markets have debt trading at distressed levels, First Deputy Managing Director Gita Gopinath said in an interview with Michael McKee on Bloomberg Television on Friday. .

“We will probably see more countries in need of debt relief,” she said.

The surge in prices triggered a series of interest rate hikes around the world by central banks, led by the aggressive actions of the Federal Reserve, which inflated the dollar. Meanwhile, developing countries have amassed a quarter of a trillion dollars in troubled debt that threatens to create a historic cascade of defaults.

“The depreciation of emerging market currencies against the dollar has inflationary consequences,” Gopinath said. “It makes monetary policy for them much more difficult at the moment and there are countries that have borrowed in dollars, it makes it difficult for them to repay.”

The worsening debt burden comes after the expiry in December of the so-called Common Framework adopted by the Group of 20 to suspend or reorganize debt repayments for low-income countries during the Covid-19 pandemic. The framework incorporates the Paris Club of mostly wealthy creditor countries as well as China, which is not a member but is the world’s largest official bilateral lender.

“Much faster action is needed, and the scope of the framework needs to be extended to middle-income countries,” Gopinath said.

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