IMF Warns Of Economic Collapse In St Vincent and the Grenadines

"by" St Vincent Times
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The International Monetary Fund has warned of “economic collapse” in SVG and other low-income countries unless creditors in the world’s richest nations suspend debt-service obligations and help renegotiate new terms.

About 60% of the world’s poorest countries are at high risk or are already in debt distress, double the share in 2015, IMF Managing Director Kristalina Georgieva and Ceyla Pazarbasioglu, head of the fund’s strategy, policy, and review department, said last Thursday.

The IMF said island nations that are at risk, include: St. Vincent and the Grenadines, Haiti, Kiribati, Maldives, Marshall Islands, Micronesia, Papua New Guinea, Samoa, Tonga, Tuvalu.

With the Group of 20’s debt-service suspension initiative expiring at the end of the year and interest rates poised to rise, “low-income countries will find it increasingly difficult to service their debts,” the IMF officials said. “We may see an economic collapse in some countries unless G-20 creditors agree to accelerate debt restructurings and suspend debt service while the restructurings are being negotiated.”

Covid-19 has dealt a major blow to the world’s poorest countries, causing a recession that could push more than 100 million people into extreme poverty, according to the World Bank. The challenges are mounting with the discovery of the omicron variant, which is driving a new wave of infections, the report stated.

Georgieva and Pazarbasioglu called for the G-20’s so-called common framework — a plan to reorganize loans — to be “stepped up” to help poorer nations. The strategy has been plagued by delays and a lack of interest from debtor countries since its inception in November 2020. Only three of the 73 eligible countries — Chad, Ethiopia and Zambia — have applied for the program.

The expiration of the debt-service relief will force “participating countries to resume debt service payments,” the IMF officials said. “Quick action is needed to build confidence in the framework and provide a road map for helping other countries facing increasing debt vulnerabilities.”

Additional Notes

The IMF in its July 2021 country report on SVG said the island’s economy is estimated to have contracted in 2020 by 3.8 percent as tourism activity fell 70 percent. Before the eruption, economic growth was expected to be flat in 2021, as the global pandemic continued, and tourism remained depressed. The IMF in its report also forecasts the economy to contract by 6.1 percent in 2021 with agriculture and related sectors severely affected by the eruption of La Soufriere.

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