WASHINGTON :International Monetary Fund chief Kristalina Georgieva said on Friday that debtors and creditors made “tangible progress” on debt restructuring issues this week, but urged countries facing mounting debt problems to seek help earlier in the process.
A new sovereign debt roundtable was helping to accelerate work on debt restructurings, Georgieva told a news conference during the IMF and World Bank spring meetings in Washington. She said participants had reached a common understanding this week of the role multilateral development banks could play, by providing positive net flows to countries in need.
But countries nearing debt distress and their creditors should move forward on reprofiling debt levels before a full restructuring was needed, she said.
“I very much hope that we will take, proactively, steps to prevent the need (for) restructuring by reprofiling debt early, by providing financial support to countries so they can step up economic activities … and avoid a more massive debt restructuring process,” Georgieva said.
“We have to be, of course, prepared, should global conditions worsen. Imagine a further tightening of financial conditions, that increases the burden on these countries,” she added. “Please, let’s act before the situation becomes dire.”
Georgieva said the IMF would continue to work closely with the 20 African countries with heavy debt burdens to avoid getting to the point where restructurings were needed.
Spanish Economy Minister Nadia Calvino, who chairs the International Monetary and Financial Committee (IMFC), the IMF’s steering committee, said the week’s meetings had been “particularly productive” on the debt front.
Debt roundtable participants – creditor and borrowing countries, as well as private-sector participants and international financial institutions – will reconvene in mid-May for a workshop to discuss how different creditors are treated in a restructuring case.
That has been a big concern for China, the world’s largest sovereign creditor, which has been unwilling to accept losses on loans unless private-sector creditors and multilateral development banks shoulder their share of the burden.