IMF bailouts hit record high as global economic outlook deteriorates


Kevin Gallagher, of Boston University’s Global Development Policy Center, warned that “a limited number of countries” could receive IMF aid without “breaking the IMF’s track record”.

Mr Gallagher co-authored a report this week warning that 55 of the world’s poorest countries face debt repayments of $436 billion between 2022 and 2028, with around $61 billion due this year and in 2023, and nearly $70 billion in 2024.

The fund played down concerns. Its total commitments represent “still a fraction of the [almost] $1 trillion that might be available,” said Bikas Joshi, division chief in the IMF’s Strategy, Policy, and Review Department. “The amount of loans increases in proportion to the increased risks faced by countries that look to us for help.”

The IMF is in talks with several countries on support packages that would further increase its total commitments.

Zambia and Sri Lanka – both of which defaulted in the pandemic along with Lebanon, Russia and Suriname – are negotiating IMF bailouts as part of debt restructuring efforts. Ghana, Egypt and Tunisia are in preliminary talks for similar support.

The IMF approved a $1.1 billion bailout package for Pakistan at the end of August; Argentina is expected to receive $3.9 billion over the next few weeks under its $41 billion program.

Under IMF rules, member countries can generally only get support equal to 145% of their IMF quota or equity, which is roughly equal to each country’s share of the global economy.

That would leave $370 billion available for low- and middle-income countries out of the IMF’s total lending capacity of about $940 billion.

But this limit is often exceeded. Argentina’s support package – approved in March as a debt restructuring of its record $50 billion bailout from the IMF in 2018 – is equal to more than 10 times its quota. Goldman Sachs analysts expect Egypt to soon receive a $15 billion package, almost six times its quota.

The IMF is making limited additions to its lending capacity. It traditionally lends from two main mechanisms, the so-called General Resources Account and the Poverty Reduction and Growth Trust Fund, which lends at lower interest rates to low-income countries.

He recently set up a Resilience and Sustainability Trust, designed to help countries address systemic challenges such as climate $40 billion, against a target of $45 billion.

A new food shock window, to help countries hit by soaring food prices, is expected to be approved by the IMF’s executive board ahead of its annual meetings next month.

FinancialTimes

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