The debt restructuring process for low-income countries must be accelerated, otherwise a series of “disorderly” sovereign debt defaults could occur, an International Monetary Fund (IMF) official said on Tuesday.
A clearer understanding of what it means to treat creditors fairly in G20 Common Framework restructuring processes is needed, Daniel Leigh, who leads the preparation of the International Monetary Fund’s World Economic Report, told Reuters in Johannesburg.
The common framework, created in 2020 by major G20 economies in response to the Covid-19 pandemic, has been criticized for long delays and disagreements.
Zambia is in its fourth year of default and Ethiopia requested debt relief in early 2021 and defaulted in December 2023 without it, while Ghana is also restructuring its debts through the process.
“We have seen with … the G20 common framework faster progress, but we actually wish it were faster because otherwise there would be a disorderly spread by default,” Leigh said in an interview.
The IMF raised its global growth forecast for 2024 by 0.2 percentage points to 3.1% and said a “soft landing” for the global economy is in sight as inflation begins to decline across the world.
Financing conditions are improving, but financing is expected to remain expensive for many emerging economies, Leigh said.
“Until inflation is really contained, which we actually expect to happen in 2025, we will still have high borrowing costs,” he said.
Sub-Saharan Africa’s growth is expected to accelerate this year to 3.8% from 3.3% in 2023. However, the forecast for 2024 is 0.2 percentage points lower than previous forecasts, driven by weaker growth in South Africa due to ongoing electricity and port problems, rail and logistics restrictions.
According to the report, Egypt’s GDP growth forecast in 2024 was cut by 0.6 percentage points to 3%, which would represent a decline from 3.8% last year.
The downgrade is due to the impact of the war between Israel and Gaza on “tourism and Suez Canal earnings… (and) the persistence of foreign exchange shortages and the need to truly control inflation and raise interest rates interest,” Leigh said.
Ongoing negotiations between the IMF and Egypt could lead to the completion of the first and second reviews of its $3 billion program “in the coming weeks”, he said.
Source: Terra
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