IMF chief worries about middle-income countries, calls for broad definition of “vulnerable”

The director of the International Monetary Fund said on Wednesday that she would discuss with IMF members whether they support the offer of low-interest, interest-free financing to middle-income countries hit hard by the pandemic, and not just to the poorest countries.

Managing Director Kristalina Georgieva said she was concerned about tourism-dependent countries and other middle-income countries that had weaker fundamentals and high debt levels, even before the pandemic, and generally supported the adoption of a broader definition of what makes a country “vulnerable”.

The IMF’s Poverty Reduction and Growth Trust Fund can currently only lend to the poorest countries, which limits the ability of developing countries with higher income levels to obtain low-interest loans. little or no interest from the IMF.

The United Nations and other agencies have urged the Group of 20 Major Economies to extend the freeze on official bilateral debt payments and a new common framework for handling debt to include those countries, many of which have been hit hard. affected by the pandemic and its economic consequences. Publication date.

G20 finance officials on Wednesday backed a $ 650 billion increase in IMF emergency reserves, or special drawing rights, that wealthier IMF members can lend to the IMF’s PRGT to help the poorest countries. poor.

Georgieva said the IMF plans to complete work on a formal SDR $ 650 billion allocation proposal by mid-June, and is also working on ways for IMF members to lend their reserves to help the poor countries.

She said it was “realistic” that members could access the expanded reserves by mid-August, but declined to estimate how many SDRs would likely be shared by richer countries.

While IMF members can already lend excess SDRs to the IMF’s PRGT facility, there is no formal IMF mechanism in place to facilitate lending to assist middle-income countries.

Georgieva said the issue was raised at Wednesday’s G20 meeting, noting a call from Mexico and Argentina for more debt relief for middle-income countries.

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The EU believes middle-income countries should be covered by the G20 common framework, European Commission Vice-President Valdis Dombrovskis said in a statement to the IMF’s steering committee released on Wednesday.

He said the framework should become the “standard process for all debt restructuring cases, including in middle-income countries,” and urged the IMF to continue exploring additional tools to meet the needs of his members.

Georgieva said there are other ways to support middle-income countries, but gave no specific details. She said she would discuss with members the possibility of opening concessional financing terms to these countries as well.

Georgieva said her personal view was that the international community should broaden its view of “vulnerability” beyond simple income levels to include climate shocks.

“The international community should look at other vulnerabilities as we think about appropriate ways to support developing countries, and this discussion will continue quite intensively over the next few months,” she said. declared.

While Argentina and Mexico have warned of a possible debt crisis, the IMF chief said she did not expect a systemic debt crisis at this time, but that the Fund would remain vigilant.

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