IMF Chief Calls for Action on Global Debt Levels to Support Low-Income Countries

BANGKOK (AP) — The U.S. and other wealthy nations need to urgently tackle mounting global debt levels that are weighing most heavily on low-income countries and straining the global financial system, according to Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF). Georgieva stated that U.S. Treasury Secretary Scott Bessent and other leaders acknowledge that the federal deficit and national debt are too high, but economic growth alone will not suffice to address the national debt exceeding $40 trillion. Rising bond yields, which reflect higher premiums demanded by investors for taking on greater risk, have been disrupting financial markets. "We believe that growth, of course, helps, but it cannot deliver fast enough the necessary adjustments," Georgieva said during the autumn meeting of the IMF and World Bank in Bangkok. She emphasized the need for additional measures, stating, "You have to go in a direction of tightening, bringing it down, bringing the deficit down." Rising debt levels and global inflation, partly due to high energy costs linked to the Iran war, have pushed interest rates to multidecade highs, increasing the burdens on the world's poorest nations. Efforts to control debt through what experts refer to as "fiscal consolidation" have faced setbacks from significant spending during the COVID-19 pandemic. Rodrigo Valdes, director of the IMF's Fiscal Affairs Department, noted that "fiscal risks are rising, and a proper reaction is largely absent in many countries," adding that the effects of fiscal indiscipline in major advanced economies impact the global economy. The IMF's latest Fiscal Monitor reported that among the world's poorest countries, interest payments have reached historic highs relative to revenue, with declining aid creating financing gaps. This situation forces countries to choose between supporting vulnerable populations and meeting debt obligations. U.K. Foreign Secretary Ed Miliband remarked, "The Global South is paying the price for rising interest rates in wealthier countries," calling for a new debt deal that allows countries to repay over longer time horizons and refinance at better rates. Alexander De Croo, former Belgian prime minister and administrator of the United Nations Development Programme (UNDP), stated that the median developing country pays three times as much in interest as developed countries, with nearly 10% of government spending directed toward debt repayments. High fuel and fertilizer prices, the El Niño weather phenomenon, and rising borrowing costs leave many low-income countries with limited recovery options. De Croo expressed concern, stating, "I mean, we don't see really a light at the end of the tunnel." Job creation is also a priority, especially as the rise of artificial intelligence threatens traditional jobs. The UNDP announced its "Jobs for Prosperity" initiative to unite governments, development banks, and private businesses to encourage investment in sectors like tourism, healthcare, and food processing. This initiative aims to attract investment by enhancing governance and developing "investible projects." Separately, the IMF, Bank of Thailand, and World Bank Group unveiled a "Bangkok Blueprint" to combat cybercrime, financial fraud, and online scams. This announcement followed cyberattacks that caused refrigeration systems to overheat at numerous stores in France.