1. IMF Comes to the Rescue as Global Economic Outlook Worsens
- While the IMF’s lending to economically troubled countries has hit a record high, at least five countries have been pushed into default, with more expected to follow.
- The IMF is in negotiations with several countries about support packages which would increase its total commitments further.
The pandemic forced dozens of countries to reach out to the IMF for assistance but Russia’s invasion of Ukraine and a sharp rise in global interest rates has seen them reach out again for more.
According to IMF data, the volume of loans disbursed by the fund amounted to US$140 billion in 44 separate programs at the end of August.
IMF lending is already higher than the amount of credit outstanding at the end of 2020 and 2021, when levels reached record annual highs because of the pandemic.
Borrowing figures from the IMF are expected to grow further in the coming months as interest rates soar which will risk triggering a severe recession.
And while the IMF’s lending to economically troubled countries has hit a record high, at least five countries have been pushed into default, with more expected to follow.
Some analysts say the IMF’s lending capacity could soon be stretched to its limits, as poor countries which are locked out of international debt markets are forced to turn to the fund for support.
With the IMF’s total commitments, including loans agreed but not yet disbursed, already standing at more than US$268 billion, the IMF is in negotiations with several countries about support packages which would increase its total commitments further.
Zambia and Sri Lanka, which both defaulted in the pandemic, along with Lebanon, Russia and Suriname, are negotiating IMF bailouts as part of efforts to restructure their debt.
Ghana, Egypt and Tunisia are in early talks for IMF support.
Meanwhile, Pakistan was approved for a US$1.1 billion bailout at the end of August and Argentina is set to receive US$3.9 billion in the next few weeks as part of its US$41 billion package.
The IMF has warned that 55 of the world’s poorest countries face debt repayments of US$436 billion between 2022 and 2028, with about US$61 billion falling due this year and in 2023, and almost US$70 billion in 2024, when a recession is most likely to hit.