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IMF Raises Concerns over Debt Restructuring Requests as Ghana Seeks Support

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The International Monetary Fund (IMF) has raised concerns over a potential wave of debt restructuring requests and how they will be handled, as current restructuring cases are facing costly delays, with Zambia being the most recent example. Ghana is one of the countries facing high debt vulnerabilities and is presently seeking an IMF-support programme but is facing hurdles to securing an agreement with its bilateral creditors for a debt restructuring.

According to the IMF’s Managing Director, Kristalina Georgieva, about 15% of low-income countries are already in debt distress, and another 45% face high debt vulnerabilities. She made a passionate appeal to richer countries to support weaker ones, saying that for the weakest members of our global family, additional support from wealthier countries is essential. She pleaded for help to handle the burden of debt, which was made so much harder by the shocks of the past years, and to ensure that the IMF continues to be in a position to support them in the years ahead.

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To help resolve this issue, the IMF, the World Bank, and India as G20 Chair, recently put in place a Global Sovereign Debt Roundtable. It brought together public and private creditors, as well as borrowers, to help reach consensus on standards and processes to speed up restructuring cases, including those under the G20’s Common Framework.

According to Kristalina Georgieva, the IMF has increased its interest-free lending more than four-fold to $24 billion since the beginning of the pandemic. Now, they are urgently calling on wealthier members to help address fundraising shortfalls in the Poverty Reduction and Growth Trust, which is critical to ensure that the IMF can continue to provide vital support and help catalyze financing from others.

The IMF has so far provided nearly $300 billion in new financing for 96 countries since the start of the Covid-19 pandemic. The historic SDR allocation of $650 billion helped to boost member countries’ reserves. Kristalina Georgieva said that the precautionary facilities provide an additional buffer to countries with strong economic fundamentals, and they recently provided one for Morocco.

She explained that through innovations in their toolkit, including the Food Shock Window and the Resilience and Sustainability Trust, they are helping members meet new challenges. They have also stepped up support for vulnerable middle-income countries, including through a temporary increase in the amount members can borrow from the IMF, and provided new financing to countries such as Sri Lanka and Ukraine. Kristalina Georgieva emphasized that this is precisely what the Fund is here to do: be a source of stability in turbulent times.

 

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