IMF forecasts debt defaults and calls for decisive action to avoid financial catastrophe

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“Doing too little too late is expensive for debtors and creditors alike,” said Kristalina Georgieva, managing director of the Fund, warning that global debt levels would reach 100% of Gross Domestic Product (GDP) in 2021 and that the negative impact of sovereign default could spread quickly edit


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247 – The International Monetary Fund warns that several countries will have to take decisive measures to avoid defaulting on their sovereign debts, whose levels approach 100% of GDP, as is also the case in Brazil. Check out a Reuters report about it:

WASHINGTON (Reuters) – The head of the International Monetary Fund (IMF) on Sunday called for significant measures to deal with the increasingly unsustainable debt burden in some countries, urging creditors and debtors to start restructuring processes as soon as possible.

IMF Managing Director Kristalina Georgieva said at an online event organized by the G30 group of former policymakers and academics that a six-month extension of the freeze on official bilateral payments agreed by the Group of the 20 major economies last week would help. , but said that more urgent measures are needed.

“We are buying time, but we have to face the reality that there are much more decisive actions ahead,” she said, urging creditors and debtors to start restructuring unsustainable levels of debt in some countries without delay.

“Doing too little too late is expensive for debtors and creditors alike,” she said, warning that global debt levels would reach 100% of Gross Domestic Product (GDP) in 2021 and that the negative impact of sovereign default could be spread quickly.

Georgieva said creditors should adopt contractual clauses to minimize economic disruption, increase transparency and endorse a common framework agreed in principle by the G20 last week.

Georgieva’s comments come amid growing concern about sharp increases in debt levels – especially among low- and middle-income countries (hard hit by the new coronavirus) -, a drop in tourism and, in some cases, lower prices low oil prices.

The G20 Debt Service Suspension Initiative helped 44 countries to postpone $ 5 billion in payments, with resources likely to be spent on mitigating the Covid-19 crisis, but its effectiveness has been limited by the absence of private creditors and failure of China to include all state institutions.

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