About 60 per cent of low-income countries are at high risk of or already in debt distress, and about 20 emerging markets have debt that’s trading at distressed levels, First Deputy Managing Director Gita Gopinath said in an interview with Michael McKee on Bloomberg Television Friday.
“We will likely see more countries needing debt relief,” she said.
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“Depreciation of emerging-market currencies relative to the dollar has inflationary consequences,” Gopinath said. “That’s making monetary policy for them much more challenging at this time and there are countries that have borrowed in dollars, this makes it difficult for them to repay."
The worsening debt burden comes after the expiration in December of the so-called Common Framework adopted by the Group of 20 to suspend or revamp debt repayments by low-income countries during the Covid-19 pandemic. The framework incorporates the Paris Club of mostly rich creditor countries as well as China, which isn’t a member, but is the world’s biggest official bilateral lender.
“A lot more speedy action is needed, and the scope of the framework has to be expanded to middle-income countries,” Gopinath said.
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