The IMF warns that St. Vincent and the Grenadines and other low-income countries face economic collapse due to rising debt distress, exacerbated by the COVID-19 pandemic. With a crucial debt-service suspension initiative set to expire, experts emphasize the need for urgent action from the G-20 to support these vulnerable economies.
The International Monetary Fund (IMF) has issued a stark warning about the economic vulnerability of St. Vincent and the Grenadines, along with several low-income nations. IMF officials noted that approximately 60% of the world’s poorest countries are either on the brink of or already experiencing debt distress. Nations such as Haiti, Kiribati, and Tuvalu have been identified as particularly at risk.
With the expiration of the Group of 20’s debt-service suspension initiative looming, along with rising interest rates, low-income nations are expected to increasingly struggle with debt obligations. “Some countries may face economic collapse unless G-20 creditors agree to accelerate debt restructurings and suspend debt service during the restructuring negotiations,” warned Kristalina Georgieva and Ceyla Pazarbasioglu from the IMF.
The COVID-19 pandemic has severely affected the economies of the poorest nations, with the World Bank estimating that over 100 million individuals have been plunged into extreme poverty due to the ensuing recession. The emergence of the omicron variant has further exacerbated these challenges, prompting calls for the G-20 to “step up” efforts for debt restructuring assistance.
Despite the creation of a common framework for loan restructuring in November 2020, progress has been slow, with only three out of 73 eligible nations, namely Chad, Ethiopia, and Zambia, applying for the program. The IMF has indicated that participating countries will need to resume debt service payments once the relief program ends, emphasizing the need for immediate action to restore confidence and assist nations facing escalating debt issues.
In its July 2021 country report, the IMF highlighted that St. Vincent and the Grenadines experienced a 3.8% contraction in 2020 due to a 70% decline in tourism. Predictions for 2021 indicated stagnant growth, worsened by the La Soufrière eruption, with the economy forecasted to contract by 6.1%.
In summary, the IMF’s warning about the economic instability in St. Vincent and the Grenadines and other low-income nations serves to highlight the urgent need for debt restructuring and relief. The challenges posed by COVID-19 have significantly impacted these economies, necessitating immediate action from international creditors to avert potential economic collapse. Without timely intervention, many countries may face dire financial straits, further exacerbating global poverty levels.
Original Source: wicnews.com
