Emerging-market nations’ efforts to recover from the pandemic-induced economic crisis can spill over to hurt developing countries, which should be doing all it can to ensure better access to vaccines and a more equitable recovery, the Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva, has said. Speaking at a virtual event hosted by the Washington Post yesterday, she said poorer nations are faced with the risk of interest rates increasing while their economies aren’t growing, and may find themselves “really strangled” to service debt, especially if it’s dollar-denominated.
“That is not only danger for them, it is a danger for global supply chains, it’s a danger for investor confidence — in other words, it has a ricochet impact on advanced economies,” she said. “Closing our eyes to this divergence can harm not only those countries and their people, which is bad enough, but it can harm the global recovery and it can harm investor sentiment in a way that we see to be significant and requiring very close attention.” Measures taken to stimulate the U.S. economy are, on balance, translating into “good news” for other countries because of the spillover effect of demand, the IMF chief said.
Georgieva said she’s concerned about 2022 and beyond, when even a relatively small increase in interest rates, combined with a possibly stronger dollar, could create problems for corporate and sovereign debt, which was high even before the crisis