The Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva says that the IMF is working very hard to press for urgent debt resolution for countries like Sri Lanka, engaging with traditional creditors such as the Paris Club and non-traditional creditors including China and India before it grows into a bad surprise on the world economy. 

During an interview with CBS News, the IMF Chief highlighted that, so far the countries that are in distress as a result of the debt borrowed in dollars are not systemically significant to trigger a debt crisis.

In response to a question regarding whether the IMF notices the governments of low-income countries are collapsing with defaults, and how much of a contagion it will become, Ms. Georgieva stated that countries such as Chad, Ethiopia, Zambia, Ghana, Lebanon, Suriname and Sri Lanka are very important for their people to find the resolution to the debt problem, adding that the risk of contagion is not as high. 

“25% of emerging markets are trading in distressed territory. Then the world economy maybe for a bad surprise. And this is why the IMF working very hard to press for debt resolution for these countries and we have engaged in the traditional creditors, the Paris Club, and the non-traditional creditors China India, Saudi Arabia. Our call is very simple urgency, and we have to act”, she said.

Meanwhile, the IMF Chief further warned that a third of the global economy will be in recession this year, pointing out that 2023 will be “tougher” than last year as the US, EU and China see their economies slow.

It comes as the war in Ukraine, rising prices, higher interest rates and the spread of Covid in China weigh on the global economy, she expressed.