The International Monetary Fund (IMF) has urged the Group of 20 countries to take strong policy actions to reverse a “dangerous divergence” that threatens to leave most developing economies, grappling with the Covid-19 crisis, languishing for years.
IMF Managing Director, Kristalina Georgieva, who stated this in a blog on Wednesday, said “much stronger international collaboration” was needed to accelerate the rollout of Covid-19 vaccines in poorer countries, including addi-tional funding to help them buy doses and reallocation of excess vaccines from surplus to deficit countries.
She called for continued, targeted fiscal support by G20 governments to support economies, and said central banks should maintain accommodative monetary and financial policies to support flow of credit to households, and firms. On Tuesday, the World Bank’s Chief Economist, Carmen Reinhart, said that fears of credit rating downgrades would deter the world’s poorest countries from taking advantage of debt relief being offered under the G20 common framework. In November, G20 countries launched a framework designed to streamline a process to help countries defer or negotiate down their debt as part of a wider relief programme.
Ethiopia’s application in January to the programme – which foresees private creditor participation – prompted Fitch and S&P to slash the country’s sovereign rating. “Countries will weigh that in… especially those countries which are still hoping to access private capital, to tap capital markets,” Reinhart said, adding that “the prospect of being downgraded is going to be a deterrent.”
Nonetheless, thelongerthe effectsof thepandemiclasted themorecountrieswouldfind themselves in debt distress and having to apply for relief anyway, she said. The framework – which comes in addition to payment relief under the G20 Debt Service Suspension Initiative (DSSI) – is open to more than 70 of the world’s poorest countries such as Nigeria, Pakistan, Mongolia, Cameroon and Angola.