IMF Warns of Economic Collapse Risk for St Vincent and the Grenadines

The IMF has warned that St Vincent and the Grenadines and similar low-income countries are at risk of economic collapse due to high debt distress, exacerbated by the Covid-19 pandemic. Actions are urgently needed from the G-20 to assist in restructuring debts as the expiration of debt relief initiatives approaches.

The International Monetary Fund (IMF) has issued a warning regarding the economic vulnerability of St Vincent and the Grenadines and several other low-income nations, indicating a potential risk of economic collapse. IMF officials Kristalina Georgieva and Ceyla Pazarbasioglu reported that approximately 60% of the world’s poorest countries are either in debt distress or face impending risks of such conditions.

Among the nations highlighted, St. Vincent and the Grenadines, along with Haiti, Kiribati, Maldives, Marshall Islands, Micronesia, Papua New Guinea, Samoa, Tonga, and Tuvalu, are presently at high risk. The expiration of the Group of 20’s debt-service suspension initiative at the end of the year, coupled with rising interest rates, will further challenge these low-income countries in managing their debts. IMF officials expressed that without expedited debt restructuring, some countries could face dire economic consequences.

The economic downturn caused by the Covid-19 pandemic has severely affected these vulnerable nations, pushing over 100 million individuals into extreme poverty, as estimated by the World Bank. The growing complications from the emergence of the omicron variant add to this turmoil. Georgieva and Pazarbasioglu emphasized the necessity for the G-20 to enhance its common framework for loan restructuring to support struggling nations.

Since the framework’s initiation in November 2020, it has encountered significant delays, with only three out of 73 eligible countries—Chad, Ethiopia, and Zambia—engaging with the program. The IMF cautioned that once the debt relief expires, participating nations must recommence debt services, underscoring the urgency for effective measures to rebuild confidence in the current financial system.

According to the IMF’s country report from July 2021, St Vincent and the Grenadines faced an economic contraction of 3.8% in 2020 due to a significant decline in tourism by 70%. Predictions for 2021 indicated flat economic growth, with an additional contraction of 6.1% expected in light of the pandemic’s ongoing impact and the destructive eruption of La Soufriere on the island, markedly affecting agriculture and related sectors.

In conclusion, the IMF’s warning brings to light the critical economic challenges facing St Vincent and the Grenadines and similar countries, primarily due to debt distress and the repercussions of the Covid-19 pandemic. Immediate actions from international creditors, particularly the G-20, are necessary to assist these nations in preventing economic collapse and managing their debts effectively during this unprecedented crisis. Continued support and restructuring efforts are essential for recovery.

Original Source: wicnews.com