Poor nations could face 'economic collapse' sans G20 debt relief: IMF

“For many of these countries, the challenges are mounting,” a blog co-authored by Georgieva and Ceyla Pazarbasioglu, director at the IMF strategy, policy and review department, cautioned.

“We may see economic collapse in some countries unless G20 creditors agree to accelerate debt restructurings and suspend debt service while the restructurings are being negotiated,” they said.

The G20 group launched the Debt Service Suspension Initiative (DSSI) in spring last year to offer a temporary freeze in payments to low-income countries, many of which had already faced hefty debt burdens before the pandemic. However, that will be over by the end of the year. Progress on another G20 plan, the Common Framework for Debt Treatments designed to reduce the overall debt burdens of poor countries, has been very slow as well.

“Recent experiences of Chad, Ethiopia, and Zambia show that the Common Framework for debt treatments beyond the DSSI must be improved,” the authors wrote, acknowledging that the Common Framework had yet to deliver on its promise.

The reasons for this were manifold: coordinating Paris Club and other creditors, as well as multiple government institutions and agencies within creditor countries slowed down decision making. In Chad’s case, having to restructure a large, collateralised obligation held by a private company and partly syndicated to a large number of banks and funds complicated progress.

“It is also critical that private sector creditors implement debt relief on comparable terms,” the authors wrote.

“No doubt 2022 will be much more challenging with the tightening of international financial conditions on the horizon,” the blog added.

Fibre2Fashion News Desk (DS)