The deputy managing director of the International Monetary Fund (IMF), Dr. Nigel Clarke, said Monday the international community must further improve debt restructuring processes to ensure that countries with unsustainable debt have access to timely and sufficiently deep debt relief.
During the keynote address at the Fourth Financing for Development Conference (FFD4), Dr Clarke. a former finance and planning minister of Jamaica, said that the four day event comes at “a particularly challenging moment”, and “at a time when the resilience of the world economy is being tested.”
He said uncertainty has been escalating as major policy shifts reshape countries’ priorities and despite progress on trade talks and the scaling back of some tariffs, trade policy uncertainty indicators remain “off the charts”.
“This has major implications for developing countries, for whom risks have grown,” he observed. “Downside risks to short-term and longer-term growth prospects. Risks of tightened financing conditions. And yes, risks to their development agenda, including due to cuts in overseas development assistance.”
“That is why this conference is so important, and so timely. It provides an opportunity to take decisive and necessary steps to accelerate development progress. And these steps must be taken at both the individual country level and the international community level,” Dr Clarke said, outlining three critical priorities covering the country and international levels.
Dr Clarke said at the country level, there is a need to implement strong domestic reforms, noting that “in an uncertain economic environment, the work to advance development must begin at home”.
He made reference to two sets of critical reforms within this first priority, saying that domestic revenues remain the bedrock of country-led efforts for sustainable growth and development.
Dr Clarke noted that many countries can boost the resources available to them by broadening the tax base and improving compliance.
He said building strong public financial management systems are also needed that can redirect spending to sectors like health, education, well-targeted social safety nets, and growth- enhancing public investments.
He said that the second priority, at the international level, is to ensure that the support to development is coordinated and tailored.
“Development partners must help with policy advice, capacity building, and financial support. And to be effective,” he said, “that assistance should be tailored to countries’ individual circumstances and challenges. Indeed, while developing countries share many characteristics, there are differences in their economic conditions.”
The IMF deputy managing director said that the needs of the poorest and most fragile countries—in particular, those who are often hit hardest by global shocks—demand everyone’s attention, and for these countries concessional financing remains of critical importance.
Dr Clarke said the risk of a systemic debt crisis seems broadly contained for now, but he noted that many countries are struggling with high interest costs and refinancing needs that constrain their ability to finance critical development spending and build resilience.
“That is why the international community must further improve debt restructuring processes to ensure that countries with unsustainable debt have access to timely and sufficiently deep debt relief,” he stated.
“We have already seen progress under the Common Framework and at the Global Sovereign Debt Roundtable,” he said.
He noted that the recently published Sovereign Debt Restructuring Playbook is an important resource for countries considering seeking a restructuring.
However, he told the conference, “there is still work to be done”.
Dr Clarke said that the Washington-based financial institution is doing its part to support developing countries.
“Through our tailored policy advice, we help our members make their economies more vibrant and more resilient. We will continue to strengthen our analysis and guidance on monetary, fiscal, exchange rate, and financial sector policies,” he asserted.
He added: “Through our capacity development, we will continue to help equip our members with the tools and expertise to chart their own path, working closely with other development partners. Through our lending instruments, we provide financial support to our members when they need it.”
Dr Clarke said last year, the IMF reformed its concessional lending framework to double its lending capacity while restoring its self-sustainability.
“And we will continue to explore ways to strengthen our precautionary facilities and ensure our programmes are well-designed,” he said.
He reminded conference attendees that the IMF also actively contributes to addressing debt challenges.
“We provide technical support to individual restructuring. With the World Bank, we are advancing the work at the Global Sovereign Debt Roundtable and are implementing the ‘three-pillar approach’ to help countries with sustainable debt and strong reform agendas, but where high debt service crowds out productive spending,” he explained.
“Simply put: the IMF will continue to help our members achieve economic and financial stability—a prerequisite for reaching their development objectives,” Dr Clarke told the conference.
He affirmed: “As we work together this week, we will remain a trusted partner and champion for the international development agenda.”
“Together, we can help bring our members towards a brighter future,” he added.
The conference has brought together chief executive officers and prominent global business leaders with Heads of State and Ministers to drive solutions that unlock private finance and investments for sustainable development. —SEVILLE, Spain (CMC)
