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IMF MD says 25 percent of low income countries are with high risk “default-like”debts

The stage is set for ceremonial opening of the Global Sovereign Debt tomorrow Friday 25 on the sidelines of the G-20 finance track, and will bring in key stakeholders to discuss issues that have been impeding a timely debt restructuring process, a top official of the International Monetary Fund said.

The Global Sovereign Debt Roundtable on February 25 will be co-chaired by the IMF, the World Bank and India, which is president of G-20 countries this year.

In the eve of the roundtable meeting IMF Managing Director Kristalina Georgieva a said about 15 per cent of low-income countries are in debt distress and another 45 per cent are at high risk of debt distress. Among emerging economies, about 25 percent are at high risk and are facing “default-like” borrowing spreads,

This will be preceded by a virtual meeting on February 17. “It is basically to discuss issues that have been impeding reaching a timely debt restructuring process, and the lessons from the cases that we had in the recent past and come up with technical solutions to address these shortcomings,” Ceyla Pazarbasioglu, Director of the Strategy and Policy Review department at the IMF, told a group of reporters in Bengaluru recently.

According to her, it is mainly about processes, about standards, about definitions of key issues that will be part of the discussion.

“It’s definitely not a country specific discussion, it’s not a forum to reach any details on debt restructuring. It’s more rather, on what are the impediments, how do we identify those and what can be done to address them,” she said.

Prime Minister Narendra Modi and Finance Minister Nirmala Sitharaman have both stated that India, as G20 President, will be the voice of low-income and developing nations, and reducing

In a statement on the eve of the G20 meeting of Finance Ministers and Central Bank Governors (FMCBG), which begins in Bengaluru today Thursday 24 , International Monetary Fund (IMF) Managing Director Kristalina Georgieva said the IMF, World Bank and India’s G20 presidency will convene a new Global Sovereign Debt Roundtable to find lasting solutions to the stressed sovereign debt levels of low income nations.

“This week in Bengaluru, we will meet in person for the first time — and pave the way for creditors, both public and private, and debtor countries to work together, assess the existing shortcomings and best ways to tackle them,” she said.

“In this more shock-prone world, some emerging and developing economies will also require additional financial support. So, a well-resourced global financial safety net, with the IMF at its centre, is more important than ever,” she added.

She, however, warned that the reality is that growth is still subpar and price pressures are still too high, and after three years of shocks, too many economies and people are still hurting badly.

Georgieva said bringing inflation back to target should remain imperative for central banks. “To get there, policymakers need to stay the course on monetary tightening. Aligning fiscal and monetary policies will help. Clear communication of these policy goals is vital to avoid a sudden repricing in financial markets.”

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