Low-income countries are having to spend anywhere from 8% to 14% of their own revenue solely on debt servicing.
These nations have come under further pressure due to rising global interest rates, high inflation, and the impact of conflicts that have driven up the prices of fuel and various commodities.
In this context, the International Monetary Fund (IMF) has emphasized the need for swift and effective debt restructuring, alongside increasing concessional loans and financial support for low-income countries.
Speaking at a press conference on Saturday (October 17) on the sixth day of the IMF and World Bank Group Annual Meetings at the Queen Sirikit National Convention Center (QSNCC) in Bangkok, Thailand, IMF managing director Kristalina Georgieva highlighted several key priorities.
Saudi Arabia's Minister of Finance, Mohammed Al-Jadaan, was also present at the event, which was moderated by Julie Kozak, director of the communications department at the IMF.
Georgieva noted that inflation and economic uncertainty make life difficult for poor people. Inflation acts much like a tax, hitting low-income populations disproportionately hard.
People want an economic environment where government policies are clear and private sectors/entrepreneurs can easily expand their businesses.
The IMF MD stated that high interest rates and inflation have made it difficult to reduce debt burdens.
Although many low-income countries have made progress in controlling debt and strengthening their financial positions, debt-servicing costs are locking up a large portion of their revenues.
According to her, while the debt-to-GDP ratio is rising in high-income nations, it has decreased somewhat in low-income countries.
However, due to high interest rates, the benefits of this ratio decrease are not being fully realized.
Georgieva rejected the notion that all low-income countries must undergo massive austerity measures or harsh economic adjustments, arguing instead that actions should be tailored to each country's economic situation and debt profile.
To expand financing opportunities for low-income countries, the IMF has taken steps to mobilize additional resources under the Poverty Reduction and Growth Trust (PRGT), which provides concessional loans to eligible nations.
Georgieva announced that new reforms have created the opportunity to more than triple concessional lending compared to before.
Additionally, arrangements have been made for extra financing toward capacity-development activities to enhance financial management and institutional capabilities in these countries.
Alongside financial support, she stressed the importance of boosting domestic revenue mobilization and ensuring the effective use of public funds to counter economic crises.
Underscoring the necessity of international cooperation in resolving debt crises, the IMF MD said that swift and effective action must be taken for countries requiring debt restructuring, where the G20 Common Framework can play a vital role.
Georgieva noted that while some countries have long-term debt sustainability, they face immediate liquidity shortages. Such countries need support to increase domestic revenue collection.
At the same time, an environment favorable to private investment must be created through coordinated international financing. Given that low-income nations suffer disproportionately from global economic crises and shifts, she concluded that the international community must prioritize them when providing assistance.