IMF ready for debt restructuring
THE International Monetary Fund (IMF) has indicated that it is ready to facilitate debtor/creditor coordination and restructuring.
According to details, the institution has so far managed to avoid the systemic debt crisis experienced between 2000 and 2015.
IMF First Deputy Managing Director, Geoffrey Okamoto, said the Bretton Woods institution could facilitate debtor/ creditor coordination and restructuring by providing debt sustainability analysis.
Mr Okamoto explained that this could be done to determine the financing and relief necessary to restore sustainability and by conditioning its own financial support on high creditor participation.
“On a global level, we can support the Debt Service Suspension Initiative (DSSI) extension while encouraging its beneficiaries to tackle debt problems promptly.
“And, we will continue to support the G20 in their financing and debt-relief efforts with co-financing, data and analysis,” he said at the recent Peterson Institute for International Economics Conference.
At the country level, Mr Okamoto said, the IMF would continue to support members with financing, policy advice and capacity development to strengthen debt management and transparency.
e stressed that the IMF remained committed to providing debt service relief to its most vulnerable members.
He said the DSSI extension should create incentives for recipient countries with unsustainable debt to tackle it promptly.
For example, Mr Okamoto cited, the extension duration could be linked to an IMF programme designed to reduce vulnerabilities, including by restructuring them if needed.
“At the same time, countries with unsustainable debts should not delay restructuring and open negotiations with creditors before the situation worsens. Delaying only increases the costs—economic and human,” he warned.
Meanwhile, Mr Okamoto said the world had so far managed to avoid a systemic debt crisis.
He attributed this to very low interest rates and massive monetary policy support, extraordinary direct financial support.
Mr Okamoto said this included the IMF emergency financing to 76 countries and debt service relief to the most vulnerable economies through the G20 DSSI to 44 countries as well as the IMF’s Catastrophe Containment and Relief Trust to 29 members.
He however warned that a pandemic-induced systemic debt crisis could not be ruled out saying the longer the problem was postponed, the worse it would become.
“This is not the 1980s. We have better instruments and legal provisions. But that experienc estill haunts us, and rightly so. We know what happened: a decade of sluggish growth, low competitiveness and growing inequality.
“To avoid history being repeated, we need to address mounting debt vulnerabilities now. This requires better architecture and urgent collective action—all stakeholders must do their part,” he said.