New IMF report shows 15% of low income economies are facing debt distress

WASHINGTON - A new report by the International Monetary Fund shows that about 15 percent of low-income countries across the globe are already in debt distress.

The report dubbed ‘Confronting fragmentation where it matters most: Trade, debt, and climate action’, further reveals that an additional 45 percent of the population is further at high risk of debt distress.

“These and other pragmatic actions, such as further progress on majority voting provisions in sovereign loans and climate resilient debt clauses, can help improve debt resolution. That would reduce economic and financial uncertainty while helping countries get back to investing in their future," the IMF report states.

As per these new findings, debt is a major challenge in most countries, and fragmentation will make it harder to resolve sovereign debt crises, especially if key official creditors are divided along geopolitical lines.

The IMF noted that about 25 percent are at high risk and facing default-like borrowing spreads among emerging markets.

The global lender also stated that there were signs of progress on the Group of Twenty’s Common Framework for debt treatment.

Chad recently reached an agreement with its official and private creditors, and Zambia was progressing toward a debt restructuring. Ghana also reportedly became the fourth country to seek treatment under the Common Framework, sending a signal that it had seen as an important pathway for debt resolution.

IMF report further stipulates that those countries seeking debt restructuring under the Framework will need greater certainty on processes and standards, as well as shorter and more predictable timelines.

For countries not covered by the framework, however, the report partly said, “To support these improvements, the IMF, World Bank, and Indian G20 presidency are working with borrowers and public and private creditors to quickly establish a global sovereign debt roundtable, where we can discuss current shortcomings and make progress to address them.”

GAROWE ONLINE