29th Feb 2024

IMF: developing countries face mounting debt problems

  • IMF managing director Kristalina Georgieva (Photo:
Listen to article

Developing nations are facing mounting debt troubles as a combination of high interest rates, defaulting banks, and sluggish global growth threaten to push vulnerable economies into default.

In a press conference accompanying the publication of the annual World Economic Outlook on Tuesday (11 April), the International Monetary Fund called on monetary authorities to stay the course on interest rates.

Read and decide

Join EUobserver today

Get the EU news that really matters

Instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

"Pivoting away" now could mean "the fight against inflation may not succeed," IMF chief economist Pierre-Olivier Gourinchas said. But further tightening could mean more hardship for developing countries as banks further limit foreign lending, increasing the cost of borrowing.

Debt distress will be top of the agenda at the annual spring meetings of the World Bank and the IMF, which take place in Washington from 10 to 16 April.

Many least-developed countries have to pay double-digit interest rates on loans needed to buy food and fuel on the global dollar market. In sub-Saharan Africa "we see a strong funding squeeze" along with "a surge in food and energy prices," said Gourinchas

Worsening the outlook further is a wave of maturing bonds which are imminent. Repayments on international bonds in emerging markets will reach €27bn in 2024, significantly higher than the €7.6bn for this year. If the lack of access to global capital markets in low-income countries persists, this could lead to countries defaulting on their loans.

The IMF's resilience and sustainability trust — a lending facility for climate and pandemic preparedness for low-income and some middle-income nations — can offer some respite.

But despite receiving financial aid from multilateral and bilateral lenders to navigate the fallout from the Covid-19 pandemic, floods and high food and energy prices, countries like Kenya, Tunisia and Pakistan face severe debt problems, and many say deeper reform is needed to help low-income countries weather the storm.

Tunisia faces a "real possibility" of bankruptcy in the short-term, according to rating agency Fitch. The country's president Kais Saied in October reached a tentative agreement for a €1.9bn IMF bail-out package but last week rejected it after the fund pushed his government to remove state subsidies on basic goods and fuel.

"Regarding the IMF, foreign diktats that will lead to more poverty are unacceptable," Saied told reporters on Thursday. "Social peace is not a game." In December 2010, inflated food prices helped trigger the Tunisian revolution, which led to hundreds of deaths and the overthrow of longtime president Zine El Abidine Ben Ali.

In chapter three of its report, the IMF suggests fiscal consolidation can reduce debt burdens, but only if the economy is growing and the general economic outlook is good. It also suggests countries are too reluctant to restructure their debts — which the IMF report shows is a good way to reduce the cost of debt — out of fear of being seen as unreliable by foreign investors.

Sri Lanka, Zambia, and Ghana have already defaulted on their overseas debt and are currently negotiating debt restructuring with foreign creditors, but it is often a slow and painful process and suffers from a lack of a common framework for debt resolution. This week countries will debate how to come up with a working system, but so far, progress has been slow.

EU supply chain law fails, with 14 states failing to back it

Member states failed on Wednesday to agree to the EU's long-awaited Corporate Sustainable Due Diligence Directive, after 13 EU ambassadors declared abstention and one, Sweden, expressed opposition (there was no formal vote), EUobserver has learned.

Latest News

  1. Podcast: Hyperlocal meets supranational
  2. Von der Leyen appeals for 'new EU defence mindset'
  3. EU supply chain law fails, with 14 states failing to back it
  4. Joined-up EU defence procurement on the horizon?
  5. Macron on Western boots in Ukraine: What he really meant
  6. Amazon lobbyists banned from EU Parliament
  7. MEPs adopt new transparency rules for political ads
  8. EU nature restoration law approved after massive backlash

Stakeholders' Highlights

  1. Nordic Council of MinistersJoin the Nordic Food Systems Takeover at COP28
  2. Nordic Council of MinistersHow women and men are affected differently by climate policy
  3. Nordic Council of MinistersArtist Jessie Kleemann at Nordic pavilion during UN climate summit COP28
  4. Nordic Council of MinistersCOP28: Gathering Nordic and global experts to put food and health on the agenda
  5. Friedrich Naumann FoundationPoems of Liberty – Call for Submission “Human Rights in Inhume War”: 250€ honorary fee for selected poems
  6. World BankWorld Bank report: How to create a future where the rewards of technology benefit all levels of society?

Stakeholders' Highlights

  1. Georgia Ministry of Foreign AffairsThis autumn Europalia arts festival is all about GEORGIA!
  2. UNOPSFostering health system resilience in fragile and conflict-affected countries
  3. European Citizen's InitiativeThe European Commission launches the ‘ImagineEU’ competition for secondary school students in the EU.
  4. Nordic Council of MinistersThe Nordic Region is stepping up its efforts to reduce food waste
  5. UNOPSUNOPS begins works under EU-funded project to repair schools in Ukraine
  6. Georgia Ministry of Foreign AffairsGeorgia effectively prevents sanctions evasion against Russia – confirm EU, UK, USA

Join EUobserver

EU news that matters

Join us