The International Monetary Fund (IMF) expects debt-to-GDP ratios to go up significantly to 65 per cent in emerging markets, 50 per cent in low-income countries and around 125 per cent in advanced economies.
This is according to IMF Managing Director Kristalina Georgieva, speaking during the World Bank’s annual meetings which were organized virtually.
“Today we face a new Bretton Woods moment. A pandemic that has already cost more than a million lives. An economic calamity that will make the world economy 4.4 per cent smaller this year and strip an estimated $11 trillion of output by next year. And untold human desperation in the face of huge disruption and rising poverty for the first time in decades. Once again, we face two massive tasks: to fight the crisis today—and build a better tomorrow,” she said.
Georgieva said that prudent macroeconomic policies and strong institutions are critical for growth, jobs and improved living standards. “Strong medium-term frameworks for monetary, fiscal, and financial policies, as well as reforms to boost trade, competitiveness and productivity, can help create confidence for policy action now while building much-needed resilience for the future,” she added.
She noted that where debt is unsustainable, it should be restructured without delay, therefore, moving towards greater debt transparency and improved creditor coordination. Adding that G20 discussions on a common framework for Sovereign Debt Resolution are encouraging.
Accelerating gender equality can be a global game-changer she added. Closing the gender gap could increase GDP by an average of 35 per cent for the most unequal countries she revealed.
“Expanding internet access in Sub Saharan Africa by 10 per cent of the population could increase real per capita GDP growth by as much as 4 per cent. Digitalisation also helps with financial inclusion as a powerful tool to help overcome poverty,” she said.
“Just as the pandemic has shown that we can no longer ignore health precautions, we can no longer afford to ignore climate change. We focus on climate change because it is macro critical, posing profound threats to growth and prosperity. It is also people-critical and planet critical,” she said.
She pointed out that in the last 10 years direct damage from climate-related disasters adds up to around $1.3 trillion.