At a G20 finance ministers meeting in Asheville, North Carolina, International Monetary Fund Managing Director Kristalina Georgieva warned that soaring bond yields in wealthy economies are endangering the debt‑relief advances made by low‑income and emerging market nations.
Georgieva explained that the surge in yields is being driven by three forces: larger overall debt burdens, lingering inflation pressures linked to the still‑closed Strait of Hormuz, and competition for capital from AI‑related debt issuance. “This is not just a low‑income developing countries problem,” she said. “High debt levels in advanced economies, combined with stubborn inflation, could lead to debt‑service costs going up for everybody, including for the low‑income, for the emerging markets and developing economies.”
U.S. Treasury yields hit near‑two‑decade highs
U.S. government bonds have sold off in recent weeks, pushing the 30‑year Treasury yield close to its highest level in twenty years. The IMF fears that such global yield spikes could raise borrowing costs for vulnerable nations that rely on external financing.
Progress at risk
In 2022, the IMF estimated that 60 % of low‑income countries were in debt distress or at high risk of distress. Georgieva noted that the situation had improved thanks to strong fiscal reforms supported by international institutions and official creditors, but that progress now hangs in the balance.
“We need to remember that some of the emerging market economies have worked very hard to gain market credibility and compress spreads. That could be erased by a lift in debt‑service costs, by the increase in yields globally by advanced economies,” she warned.
Senegal test case
During the G20 session, the IMF announced a staff‑level agreement with Senegal for a $2.2 billion, three‑year loan package, contingent on Senegal seeking debt treatment under the Common Framework. The Framework, launched in November 2020 during the COVID‑19 pandemic, aims to coordinate official and private creditors in restructuring crisis‑hit debt.
Georgieva said a successful, speedy restructuring for Senegal would encourage other nations to pursue similar relief. “We have the next case,” she said. “Let’s make it work, and you can be sure that the Fund would be very relentlessly pursuing speedy completion.”
The IMF remains optimistic that G20 finance ministers and central bank governors share a broad consensus on improving the Common Framework and accelerating relief for countries in debt distress.
Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.
