The “great financial divide” between rich and poor countries slows recovery – IMF

The logo of the International Monetary Fund (IMF) is seen outside the headquarters building in Washington, United States on September 4, 2018. REUTERS / Yuri Gripas

WASHINGTON, Oct. 13 (Reuters) – Economic growth in the poorest countries will likely lag pre-pandemic expectations for years to come, given gaps in immunization rates, income growth and capacity to borrowing, the International Monetary Fund said in its Fiscal Monitor report released on Wednesday.

The level of global debt hit a record high of $ 226 trillion in 2020, a jump of $ 27 trillion in just one year, far exceeding the cumulative gain of $ 20 trillion seen in the two years. during the global financial crisis of 2008 and 2009, according to the report.

About 90% of this increase comes from advanced economies, plus China, emerging and developing economies being much less able to access financial markets for their spending needs, and also more vulnerable to possible rate hikes. interest, Vitor Gaspar, head of IMF fiscal policy, told Reuters in an interview.

“The great vaccine divide, climate change and the great financial divide are global issues that demand global action,” he said, warning low-income countries face aggravating challenges that could slow the outlook. growth for years.

The pandemic has exacerbated the “already sizeable” financing gaps that low-income countries faced before the crisis, Gaspar said, adding that emerging and developing economies were also more vulnerable to changes in global interest rates.

That meant they could see borrowing costs rise faster than expected once central banks begin to remove monetary support seen during the pandemic, according to the report.

Global public debt has stabilized at a record high of $ 88 trillion, just below 100% of gross domestic product, with fiscal and economic developments varying widely, depending on local immunization rates, stage of disease. pandemic and the ability of governments to access low cost borrowing.

Overall, according to the report, it is estimated that 65 to 75 million more people will fall into poverty by the end of 2021 than would have been the case without the pandemic.

Reporting by Andrea Shalal; Edited by Christian Schmollinger

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