WASHINGTON (Reuters) - Many countries may need debt restructuring in the aftermath of the global coronavirus pandemic and its economic fallout, the International Monetary Fund’s chief economist said on Tuesday.
Gita Gopinath told an online event hosted by the University of Oxford that there was no debt crisis at the moment, but there would be a “much more persistent need for debt relief for the poorer nations of this world” given the pandemic.
Given that about 40% of low-income countries were already in debt distress or at high risk of getting there, with the number growing, she said there could well be “a need for debt restructuring in many countries.”
The comments came a day before the Group of 20 major economies and the Paris Club of official creditors hosts a high-level conference on debt, capital flows and sustainable finance in the context of the pandemic-triggered economic crisis.
G20 finance ministers, the leaders of the IMF and the World Bank and private-sector creditors will discuss options for responding to capital outflows from emerging markets, debt challenges, and how best to foster strong, sustainable growth.
Gopinath and other international finance experts have said they believe a freeze in debt service payments offered by G20 countries to the poorest nations through year-end should be extended.
They have also called repeatedly for increased participation in the G20 debt moratorium by the private sector.
The newly appointed chief economist of the World Bank, Carmen Reinhart, told the online event that the initial timeline for the G20 debt initiative would have to be revisited and the debt restructuring process needed to become faster and more expedient.
“The main constraint is making sure that everybody’s on board, which has not been the case,” she said, noting that the participation of the private sector “hasn’t happened.”
Reporting by Andrea Shalal; Editing by Chizu Nomiyama and Jonathan Oatis