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International Monetary Fund Managing Director Kristalina Georgieva urged nations with high levels of dollar-denominated debt to try to extend their maturities now to get in front of the turbulence that could come once the Federal Reserve begins to tighten monetary policy. Picture: BLOOMBERG
International Monetary Fund Managing Director Kristalina Georgieva urged nations with high levels of dollar-denominated debt to try to extend their maturities now to get in front of the turbulence that could come once the Federal Reserve begins to tighten monetary policy. Picture: BLOOMBERG

International Monetary Fund MD Kristalina Georgieva urged nations with high levels of dollar-denominated debt to try to extend their maturities now to get in front of the turbulence that could come once the Federal Reserve begins to tighten monetary policy.

Georgieva said that her worry is highest for low-income countries because 60% are in debt distress or in danger of debt distress. She predicted a more difficult year ahead for policymakers based on the differences between countries and the nuance of the solutions required, and that 2022 will be like “navigating an obstacle course.”

“Our message to countries with high levels of dollar-denominated debt is ‘act now’,” Georgieva said on Friday during a virtual panel at the World Economic Forum, alongside European Central Bank president Christine Lagarde and Japan central bank governor Haruhiko Kuroda. “If you can extend maturities, please do it. If you have currency mismatches, now is the moment to address them.”

“We have to be careful how we also support those that without international support are going to be in deep, deep trouble,” she added. 

Covid-19 has dealt a major blow to world’s poorest countries, causing a recession that could push more than 100-million people into extreme poverty and resulted in record-high debt levels, according to the World Bank. The challenges are mounting with the Omicron variant, which is driving a new wave of infections.   

Georgieva warned that the global economic recovery is losing momentum. The IMF is set to release an update of its World Economic Outlook on January 25.

Georgieva said last month that she expects the IMF to pare back its expectations for the global economic rebound after a surge in the number of Covid-19 cases due to the Omicron strain.

The Washington-based IMF in October predicted that the global economy would expand 4.9% this year. For 2021, it had trimmed its outlook to 5.9%.

Bloomberg. More stories like this are available on bloomberg.com

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