The International Monetary Fund (IMF) has called for prudence on the part of countries around the world in managing debt burden as global public debt to Gross Domestic Product has risen to 100 per cent.
In her curtain raiser speech which previews key issues to be addressed at the IMF/World Bank Annual Meetings in Washington, the Fund’s managing director, Kristalina Georgieva, stressed the need for sovereigns to be more prudent and structure their medium-term framework to reduce their debt burdens.
Georgieva, in her speech said: “We estimate that global public debt has increased to almost 100 per cent of GDP. Much of these reflects the necessary fiscal response to the crisis as well as the heavy output and revenue losses due to the pandemic.
“Here we see yet another deep divide, with some countries more affected than others, especially in the developing world. Many started the pandemic with very little fiscal firepower. Now they have even less room in their budgets and very limited ability to issue new debt at favourable terms. In short, they face tough times and are caught on the wrong side of the fiscal financing divide.”
She noted that low-income countries, which is the faction Nigeria is grouped into, face particular challenges with massive financing needs, high debt burdens and most recently sharply higher debt servicing costs.
“They will need more revenue mobilisation, more concessional financing and more help to deal with debt problems. To face these challenges, governments need policy credibility: sound medium-term frameworks to ensure the right balance between providing support now and reducing debt over time to build trust with citizens and markets,” she stated.
Georgieva stressed that, if 40 per cent of people in every country by the end of this year, and 70 per cent by the first half of 2022 are not vaccinated, we could see global GDP losses rise to $5.3 trillion over the next five years.
On steps taken by the fund to boost global recovery, she said the IMF would remain a steadfast partner of its member countries and would continue to calibrate its financial support, as well as policy analysis and technical advice
“We have stepped up in an unprecedented manner by providing $118 billion in new financing to 87 countries and debt service relief for our poorest members.” Thanks to the collective will of our membership, we provided a new allocation of Special Drawing Rights (SDR) of $650 billion in August. This is the largest issuance in the IMF’s history in this crisis like no other. About $275 billion of the allocation went to emerging and developing countries.
“Countries have benefitted immediately from holding the new SDRs as part of their official reserves, which can boost confidence and lower borrowing costs and some already are using part of their SDRs for priority needs, or planning to do so. Yet, there is more we can do to help countries remove the obstacles to recover. We can magnify the impact of the allocation and ensure that more SDRs go to countries most in need. We are calling on countries with strong external positions to voluntarily channel their SDRs,” she pointed out.