World Bank and IMF Meetings in Marrakech to Scrutinize Finances of Pakistan and Egypt
Finance ministers and central bankers from 190 countries are set to gather in Marrakech, Morocco, for the annual meetings of the World Bank and International Monetary Fund (IMF). The focus of the meetings will be on examining the financial situations of nations such as Pakistan and Egypt. These emerging economies are facing various challenges, including uncertainty surrounding US fiscal policies, China’s slowing economy, and the impacts of extreme weather and climate change.
IMF chief, Kristalina Georgieva, highlighted the significant shocks that have hit the global economy since 2020, causing a $3.7 trillion reduction in global output. Despite some growth, it still remains below pre-pandemic levels. Georgieva emphasized the need to prioritize the fight against inflation but acknowledged that this would require keeping interest rates higher for longer.
The IMF itself is experiencing financial strain as more countries seek financial assistance. Since the pandemic, the Fund has provided approximately $320 billion in financing to 96 countries. Georgieva emphasized the need to strengthen the IMF’s lending capacity and called on member countries to take action to increase its quota resources.
JPMorgan’s September investor survey identifies Argentina, Pakistan, and Kenya as the nations most at risk of sovereign debt default. Although Argentina’s reserves are negative, Pakistan has received a bridge loan from the IMF, known as a standby agreement, to help navigate the period until the next general election. Fitch Ratings predicts that Pakistan, along with two other countries, will spend 40% or more of their revenues on debt interest payments next year.
Gregory Smith, a fund manager at M&G Investments in London, explains that the high interest rates have made it excessively costly for single-B sovereigns to access international bond markets since early 2022.
Egypt, according to the JPMorgan survey, is considered the country least likely to face a default. However, international financial institutions and multilateral development banks are under immense pressure to increase lending to poorer countries for development and climate change initiatives. UN chief Antonio Guterres has been vocal about the need for sweeping reforms in biased financial systems to ensure that low-income countries vulnerable to climate calamities receive adequate funding from wealthier nations.
The upcoming World Bank and IMF meetings will provide an opportunity for policymakers and asset managers to discuss these pressing issues and work towards finding solutions to support the global economy.
More detail via Dawn here… ( Image via Dawn )