IMF working ‘hard’ on urgent debt resolution for SL

International Monetary Fund (IMF) Managing Director Kristalina Georgieva says that the IMF is working very hard to press for urgent debt resolution for countries like Sri Lanka, engaging with traditional creditors such as the Paris Club and non-traditional creditors including China and India, before it grows into a “bad surprise” for the world economy.

During an interview with CBS News, the IMF Chief highlighted that, so far, the countries in distress as a result of US dollar-denominated debt are not systemically significant enough to trigger a debt crisis.

In response to a question regarding whether the IMF notices if the governments of low-income countries are collapsing with defaults, and how much of a contagion it will become, Georgieva stated that in countries such as Chad, Ethiopia, Zambia, Ghana, Lebanon, Suriname, and Sri Lanka, it is very important for the people to find the resolution to the debt problem, adding that the risk of contagion is not as high.

“25% of emerging markets are trading in distressed territories. Then the world economy may be in for a bad surprise. And this is why the IMF is working very hard to press for debt resolution for these countries, and we have engaged with traditional creditors, the Paris Club, and non-traditional creditors such as China, India, and Saudi Arabia. Our call is very simple and urgent, and we have to act,” she said.

Meanwhile, the IMF chief further warned that a third of the global economy will be in recession this year, pointing out that 2023 will be “tougher” than last year, as the US, EU, and China see their economies slow down.

It comes as the war in Ukraine, rising prices, higher interest rates, and the spread of Covid in China weigh on the global economy, she expressed.

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