By Andrea Shalal
WASHINGTON, Oct 18 (Reuters) – The head of the International Monetary Fund on Sunday called for major steps to be taken to address the increasingly unsustainable debt burden for some countries, and urged creditors and debtors to begin restructuring processes further. sooner rather than later.
At an online event hosted by the G-30 group of former politicians and academics, IMF Managing Director Kristalina Georgieva said a six-month extension of the debt service freeze agreed to by the G-20 last week would help. but stated that more urgent action was needed.
“We are buying some time, but we have to face the reality that we have much more decisive action ahead of us,” he said, urging creditors and debtors to begin restructuring without delay the debts of countries with unsustainable levels of indebtedness.
“Doing too little and too late is costly for debtors, costly for creditors as well,” he said, warning that global debt levels would reach 100% of Gross Domestic Product in 2021 and that the negative impact of sovereign defaults could extend quickly.
He asserted that creditors should adopt contractual provisions to minimize economic disruption, increase transparency and support a common framework agreed in principle by the G-20 last week.
Georgieva’s comments come amid growing concern over sharp increases in debt levels, especially among low- and middle-income countries affected by the coronavirus, a drop in tourism and, in some cases, a drop in debt. oil prices.
The G-20 Debt Service Suspension Initiative has helped 44 countries defer some $ 5 billion to spend on mitigating the COVID-19 crisis, but its effectiveness has been limited by the absence of private creditors and China’s inability to include all state institutions.
Many poorer countries have been reluctant to ask for a freeze on sovereign bond payments, worried that doing so could damage their ability to borrow money in the future.
(By Andrea Shalal in Washington, Edited in Spanish by Juana Casas and Manuel Farías)