Low-income countries spend up to 14 percent of their revenue on debt repayments, IMF chief says.
The International Monetary Fund (IMF) has a responsibility to help poorer nations struggling with rising debt, high inflation and price shocks caused by war spillovers, the head of the global lender says.
Speaking as the IMF’s annual meetings in Bangkok wrapped up on Saturday, Managing Director Kristalina Georgieva said discussions with global policymakers showed both “optimism and worry”.
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“Optimism from the resilience of the global economy, the promise of AI, the dynamism of Asia,” Georgieva told reporters. “But AI is also recognised to be a source of worry and so are inflation, high levels of debt, wars, climate risks.”
Georgieva said vulnerable nations are missing out on the AI investment boom that is driving growth in richer countries while at the same time dealing with higher borrowing costs.
Higher global interest rates mean low-income countries now spend 8 to 14 percent of their revenue on debt repayments, up from previous years, she said.
“I can tell you that people everywhere, but especially in poorer countries, don’t like inflation. Inflation is like a tax on the poor,” Georgieva said.
The warnings came as low-income, oil-importing countries take the strongest hit from rising global energy costs. Prices have soared since February when the United States and Israel launched a war on Iran, leading to retaliatory strikes in the Middle East and disrupted oil and gas flows.
“Escalating conflicts and trade tensions could further disrupt critical trade routes, exacerbate commodity price pressures, including in refined energy products, and worsen energy and food security,” said a statement issued by Saudi Finance Minister Mohammed Al-Jadaan, the chairman of the International Monetary and Financial Committee (IMFC).
The IMFC is the main steering committee for the 191-member crisis lender.
Debt relief and regional support
Georgieva said her organisation has a responsibility to help countries restructure debt if needed to assist with domestic resource mobilisation, bring in international finance and create conditions for private investment.
Such countries need to set spending targets that prioritise growth and protect the most vulnerable people, she said, adding that the IMF has a “relentless pursuit of more resources for low-income countries”.
“When we do our best, it translates into better lives for people,” she said.
Georgieva also said the IMF plans to back Iraq “very firmly” with a requested loan programme while talks with Lebanese authorities are making progress.
“We will get to Iraq both money and policy support,” she said. “In the case of Lebanon, we are in very intense discussions with Lebanese authorities. We have made significant progress towards the programme. We have still a bit more work to do together, and I’m confident we will be successful.”