By Clara Nwachukwu
The International Monetary Fund (IMF) has said that rising debts are crushing the ability of emerging markets to tackle current food, energy crises.
IMF Managing Director, Kristalina Georgieva, made the observation today, in her remarks at the ongoing Group of 20 (G20) Leaders’ Summit, in the Island of Bali, Indonesia.
Ms Georgieva, who identified debt as the second most pressing concern, said: “This is challenging for everybody post-COVID. But for 25 per cent of emerging market economies and 60 per cent of low-income countries, it is crushing their ability to deal with food and energy insecurity.”
She however expressed delight that the G20’s Common Framework for debt treatment is finally beginning to deliver—with Chad being the first country to complete an agreement with its official and private sector creditors. “But we need to do much, much more,” she added.
She noted that the issue of food and energy security are coming at a particularly challenging time, adding that signs of recovery last year were replaced by an abrupt slowdown in the world economy because of the COVID, the war in Ukraine, and climate disasters on all continents.
“This pushed prices up and led to a tightening of financial conditions.
“This is hard for everybody, but especially for emerging markets and developing economies. They are experiencing, in many cases, high debt levels and depreciation of their currencies and, in this very difficult time, suffering even more from the high interest rates,” she said.
The outcomes from these, she continued: “We are seeing a reversal of all we had been fighting for: bringing poverty down, bringing hunger down. Now we have 345 million people that are suffering from a food crisis.
“And this is where the G20 can do so much to change the prospects for the world economy.”
We are seeing a reversal of all we had been fighting for: bringing poverty down, bringing hunger down. Now we have 345 million people that are suffering from a food crisis.
Other concerns
Other concerns shared by the Group of 20 comprising 19 countries and the European Union (EU), include trade restrictions and climate shocks.
As a result, Ms Georgieva urged economies to remove protectionism and “to allow trade to do its job. Removing barriers, especially for food and fertilizers, can go a long way to counter the suffering of hundreds of millions of people.
“We have calculated that a world divided would lose at least 1.5 per cent of GDP annually. And the cost would be much higher–2 times higher or more–for open economies, those that depend on international cooperation.”
Despite this, she expressed optimism that the Group “can turn the tide and prevent sleepwalking into a world that is poorer and less secure.”
Regarding climate shocks, the IMF boss charged members to invest in resilience, noting that: “Shocks will continue to hit us. But it is clear that if we invest in climate-resilient agriculture and low-carbon development; we can have higher standards of living for people everywhere.”
She used the opportunity to thank all those who have contributed to the special drawing rights (SDRs) to enable the IMF on-lend them to member countries who need them most.
“We have US$40 billion today for the Resilience and Sustainability Trust, with four countries benefiting already. And we can do much more if you help us to do so,” she said.
