The IMF warns that rising global bond yields risk exacerbating the debt burden of developing countries, as AI-powered capital competes for liquidity.

The IMF warns that high debt, inflation, and funding for AI are pushing global bond yields higher, risking increased debt repayment costs and hindering progress in resolving the debt problems of developing countries.

On September 3, 2569 at 08.30:XNUMX p.m., Reuters reported that The International Monetary Fund (IMF) has warned of rising debt levels and soaring government bond yields in developed economies. This could increase global debt repayment costs and risk hindering the progress made by developing and low-income countries in managing their debt burdens over the past several years.

Kristalina Georgieva, Managing Director of the IMF. He revealed to Reuters during the G20 finance ministers and central bank governors' meeting in North Carolina, USA, that... Rising bond yields are being driven by several factors, including rising overall debt levels, inflationary pressure from the continued closure of the Strait of Hormuz, and competition for capital from bond issuances related to AI investments.

Georgieva specify that This problem is not limited to low-income developing countries, as high levels of debt in developed countries, coupled with persistently high inflation, could push up debt repayment costs for all countries, including low-income, emerging markets, and developing nations.

These concerns arose as U.S. government bonds faced selling pressure in recent weeks, pushing the 30-year Treasury yield close to its highest level in nearly 20 years.

In 2565, the IMF estimated that approximately 60% of low-income countries were in a debt crisis or at high risk of becoming so. However, the situation has improved in recent years, following these countries' implementation of significant fiscal policy reforms, supported by international institutions and government creditors.

but Georgieva Warning that This progress is at risk if global bond yields continue to rise.

She noted that some emerging market countries have made significant efforts to build market credibility and reduce borrowing cost spreads, but those successes could be negated if debt repayment costs increase due to rising bond yields in developed economies.

however Georgieva Still view it as... The bond market is currently functioning in an orderly manner and shows confidence in the discussions among G20 finance ministers and central bank governors, which reached a broad consensus on improving the Common Framework for debt restructuring and accelerating the process of assisting countries facing debt crises.

During the G20 meeting on government debt restructuring, the IMF... announced that A formal agreement has been reached with Senegal for a $2.2 billion three-year loan package, subject to Senegal undergoing debt restructuring under the Common Framework.

The Common Framework was established in November 2563, during the COVID-19 pandemic, to facilitate negotiations between public and private creditors on restructuring the debt of countries facing crises.

However, the process was initially slow, taking several years to resolve the debts of the first two debtor countries, Chad and Zambia, amidst disagreements over how to share the burden of the losses among private creditors, international institutions such as the IMF and the World Bank, and China, a major creditor.

Last May, a new process was approved to make debt restructuring faster and more efficient, clearly defining necessary steps and linking the process to financial assistance from the IMF.

Georgieva specify that If this new process can quickly and efficiently resolve Senegal's debt problems, it could instill confidence in other countries facing debt issues to consider joining a similar process.

refer : www.reuters.com

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