Low-income economies should be vigilant about debt problems, work with investors to improve transparency on debt and strike a balance between promoting investment and curbing debt vulnerability, top officials from the International Monetary Fund (IMF) and World Bank Group said on Monday.
During a public event in Washington D.C., IMF Managing Director Kristalina Georgieva said that the interest cost derived by high volume of debt may take away precious resources from people in low-income countries.
“Why I worry so much about debt in low-income countries, because what it means is that if it is not proper managed, interest rates, often high, takes away precious resources from education and health and infrastructure investments,” said Georgieva.
According to a paper released by the IMF on Monday, debt level growth in low-income economies has slowed since 2017 in recent years as oil-exporting low-income economies have experienced some recovery, but the ratio of debt to GDP in non-oil exporting low-income economies continued to rise.
The paper also warned that rising interest burdens limit the scope for counter-cyclical fiscal policy in these economies.
Besides, the IMF and World Bank both worried that lack of transparency could make the debt risk a bigger problem in a more uncertain world.
“Non-transparent debt fuels inequality and underfunds urgent needs,” World Bank President David Malpass, who was also present the same event, posted on Twitter.
“We live in a more shock-prone world and given interdependencies, it is in everyone’s interest to be transparent — including on debt issues,” the IMF noted on Twitter.