IMF chief describes Sri Lanka as a wake-up call for heavily indebted countries

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Highlighting ongoing political unrest in Sri Lanka, International Monetary Fund Managing Director Kristalina Georgieva on Saturday warned heavily indebted countries to learn lessons from Sri Lanka and said it was a signal of warning for countries with limited political space.

The IMF chief made the blunt remarks at the hybrid meeting of G20 Finance Ministers and Central Bank Governors (FMCBG) held in Indonesia and kicking off on July 15.

The war in Ukraine has escalated, putting further pressure on commodity and food prices, she said, adding that continued pandemic-related disruptions and new bottlenecks in Global supply chains are weighing on economic activity, NewsWire reported.

“As a result, later this month we forecast a further downward revision to global growth for 2022 and 2023 in our global economic outlook update. In addition, downside risks will persist and could worsen – especially if inflation is more persistent – ​​requiring stronger policy interventions that could potentially impact growth and exacerbate the fallout, particularly in emerging and developing countries. High indebtedness and limited policy space will face additional constraints.Look no further than Sri Lanka as a warning sign,” she said.

Due to the ongoing war between Russia and Ukraine, emerging and developing countries have also seen sustained capital outflows for four consecutive months as they now risk reversing three decades of catch-up with advanced economies. .

Sri Lanka is facing the worst economic crisis since its independence in 1948, leading to severe shortages of essential items like food, medicine, cooking gas and fuel across the island nation.

The near-bankrupt country, with an acute currency crisis that led to a foreign debt default, announced in April that it was suspending repayment of nearly $7 billion in foreign debt due for this year. of approximately $25 billion due through 2026, Sri Lanka. total external debt.

The economic crisis has particularly affected food security, agriculture, livelihoods and access to health services. Food production in the last harvest season was 40-50% lower than last year, and the current agricultural season is at risk, with shortages of seeds, fertilizer, fuel and credit.

Sri Lanka is one of the few countries named by the Food and Agriculture Organization of the United Nations (FAO) that is expected to go without food due to the global food shortage expected this year.

Notably, the G20 Finance Ministers and Central Bank Governors Meeting aims to stimulate the global economy to recover together in the face of various emerging challenges. The FMCBG meeting took place over two days and was preceded by the hybrid meeting of finance and central bank deputies (FCBD) on 13-14 July 2022 at the same venue.

The 3rd FMCBG meeting brought together the largest number of Indonesian G20 Presidency delegations, with 407 foreign delegations attending in person and another 120 virtually. In addition, 19 finance ministers and 11 central bank governors attended the meeting in person.

Indonesia, as chair of the G20, has also invited Ukraine’s finance minister to attend the event virtually. The physical presence of most of the G20 delegations, guests and international organizations in Bali demonstrated the global commitment to supporting Indonesia’s G20 Presidency and boosting economic sustainability, especially amid emerging global challenges.

Finance Minister and Bank Indonesia Governor Sri Mulyani Indrawati hosted the meeting.

(Only the title and image of this report may have been edited by Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

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