Washington DC July 13 2022: International Monetary Fund Managing Director Kristalina Georgieva warned of a global debt crisis in the making as central banks raise interest rates to curb inflation, increasing debt-servicing costs for vulnerable nations.
“What we see now is a crisis upon a crisis, and possibly a third shock of tightening of financial conditions to come after the pandemic and on top of the war” in Ukraine, Georgieva said at an event hosted by Devex in Washington Tuesday.
Surging prices have forced central banks worldwide to tighten monetary policy. In the US, Fed officials pivoted to aggressively lifting rates to tame the hottest inflation in four decades, a shift that has supercharged the dollar. Meanwhile, developing nations have amassed a quarter-trillion dollar pile of distressed debt that threatens to drag these countries into a historic cascade of defaults.
Nations that don’t earn the US currency but have to service debt in the greenback are finding it “twice as hard” to keep up, Georgieva said, adding that about 30% of developing and emerging-market nations are either in or near debt distress.
