SL a ‘warning sign’ for countries with high debt levels – IMF Chief

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Claiming Sri Lanka is a ‘warning sign’ for countries with high debt levels, IMF Chief Kristalina Georgieva warned officials from the Group of 20 major economies to take urgent action to combat inflation, warning that the “exceptionally uncertain” global economic outlook could turn worse if higher prices persisted.

Speaking at hybrid meeting of the G20 Finance Ministers and Central Bank Governors, held in Indonesia, she said, “I wish the global economic outlook was as bright as the sky in Bali, but unfortunately, it is not. The outlook has darkened significantly, and uncertainty is exceptionally high. Downside risks about which the IMF had previously warned have now materialized.”

The war in Ukraine has intensified, exerting added pressure on commodity and food prices. Global financial conditions are tightening more, than previously anticipated. And continuing pandemic-related disruptions and renewed bottlenecks in global supply chains are weighing on economic activity, she said.

“As a result, later this month we will project a further downgrade to global growth for both 2022 and 2023 in our World Economic Outlook Update. Moreover, downside risks will remain and could deepen – especially if inflation is more persistent — requiring even stronger policy interventions which could potentially impact growth and exacerbate spillovers particularly to emerging and developing countries. Countries with high debt levels and limited policy space will face additional strains. Look no further than Sri Lanka as a warning sign,” she said.

Emerging and developing countries have also been experiencing sustained capital outflows for four months in a row. They now suffer the risk of reversing three decades of catching up with advanced economies and instead falling further behind.