International Monetary Fund (IMF) might intervene between creditors and debtor nations on modalities for debt forgiveness.
Speaking at the yearly meeting of the World Bank and IMF in Marrakesh, Morocco, the Managing Director of IMF, Kristalina Georgieva, shared the need for debt cancellation for African and developing countries. She, however, cautioned that the move requires creditors to agree before debt cancellation can be brought to the table.
Georgieva said: “I do hear the legitimate calls of African countries, not only African countries, but countries all over the world that are burdened by debt; especially painful to see when some of this debt is because of climate related shocks, because of a problem these countries have done nothing to create.
“But we need to assess objectively and realistically. Debt cancellation requires all creditors to agree. Having the concomitant of creditors and their different configurations in every single case makes this excruciatingly difficult.”
She was quick to add that forming a creditor committee and discussing debt reliefs on a case-by-case basis might be the way to go.
“Therefore, in a case-by-case approach, when we identify the creditors, creditors come together, form a creditor committee, and then we, as institutions, the IMF together with the World Bank, provide the parameters of what they need to agree on. This is, today, the way debt restructuring is delivered,” she explained.
Speaking on regional economic outlook for sub-Saharan Africa, on the sidelines of the event, the Director, African Department of the IMF, Abebe Aemro Selassie, lamented high inflation afflicting one-third of countries on the continent.
Proffering solutions, Selassie said: “Countries, where inflation is both falling and on track to meet their target, could pause monetary policy tightening.’’
This matters because of the hugely adverse effect of inflation in eroding the incomes of the poorest in society. Second is: reducing debt vulnerabilities, while creating space for development spending. This requires a delicate balance between raising domestic revenues and reforms to foster growth.”