Public or private debt globally has fought pandemic turbulence. It all began in 2020, debt raised up to 256%, the highest since the second world war. Currently, central banks are struggling to battle with inflation by raising interest rates. It is probably manageable for big markets, but soaring inflation leads to a crisis. The sign has been shown in Brazil and India.
IMF is always trying its best to help economic recovery, but the loan program seems to walk in a tightrope.
Countries like Sri Lanka, Lebanon, Ghana, and Tunisia are joining IMF’s loan programs. On February 23rd this year, the fund discussed the Ukraine issue that has reached $700m debt. Half of the 60 poorest countries carry unimaginable debt loads needing to be restructured. 40% of low-income countries still have not updated their data about sovereign debt since 2020.
The IMF has been doing its best since the global financial crisis. It has raised the loan cap from $400bn to $1trn. In 2020, the IMF has launched a short term liquidity facility so that struggling countries can borrow cheaply. With lower strings attached, the IMF also lent a $170bn rapid credit facility for standard loan program. Last year in August, the IMF also shared $650bn worth of new Special Drawing Rights (SDRS). It is a foreign exchange reserve quasi-currency for its members.
But those help do not seem to give some ease to nearly bankrupt countries. Almost a dozen countries today cannot even manage how to repay. Without debt relief, many countries would use IMF loans to repay other creditors, said The Economist. In the past, the IMF had forgiven indebted poor countries from creditor countries funding. The concern was leveraged when putting big countries on an agreement. In the G20 meeting, countries agree to stop expanding debt relief. Meanwhile, without the ‘yes’ from those countries, the IMF would have to deal with a difficult situation.
