Kristalina Georgieva, managing director of the International Monetary Fund (IMF) urged countries with high levels of dollar-denominated debt to try to extend their maturities now to counter the turmoil that could occur once the Federal Reserve begins to tighten monetary policy, according to Bloomberg.
Georgieva said in her online intervention during an event of the World Economic Forum "Davos", that her biggest concerns are for low-income countries, because 60% of them suffer from debt distress or at risk of a debt crisis.
The managing director expected that it will be a more difficult year for policy makers based on the differences between countries and the differences in the solutions required, noting that 2022 will be like “traversing a road full of consequences.”
“Our message to countries with high levels of dollar-denominated debt is to 'act now,'" Georgieva said at the World Economic Forum, alongside European Central Bank President Christine Lagarde and Bank of Japan Governor Haruhiko Kuroda. "If you can extend the maturity, please do so.”
She continued, “If you have currency mismatches, now is the time to confront them. We have to be careful how we also support those who would be in deep trouble without international support."
The pandemic has dealt a major blow to the world's poorest countries, causing a recession that could push more than 100 million people into extreme poverty and lead to record debt levels, according to the World Bank. The challenges are growing with the omicron variant, which is driving a new wave of infection.
Georgieva warned that the global economic recovery is losing momentum.
Last month, she expected the IMF to reduce its forecast for the global economic recovery after the increase in the number of coronavirus cases caused by the omicron variable.
IMF forecast in October that the global economy will expand 4.9% this year. For 2021, it cut its forecast to 5.9%.
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