BANGKOK: IMF chief Kristalina Georgieva on Wednesday warned that current economic developments and the rapid advance of AI threaten to deepen the gulf between advanced and developing economies, especially given steep drops in development assistance.
Georgieva, the first IMF chief from a developing country, said higher benchmark yields in advanced economies were spilling over to emerging markets and low-income countries. Average debt service costs had increased to 14 percent of revenue from 6 percent a decade ago, even as overall debt burdens have eased, she said.
“The risk of divergence is most dangerous for those that are already further behind,” she told a press conference during the annual meetings of the IMF and World Bank in Bangkok, Thailand, amid a growing chorus of concern about the worsening impact of global economic developments on developing countries.
She said the International Monetary Fund recognized its responsibility to help finance countries when needed, and urged IMF member states to make good their pledges to increase funding for its Poverty Reduction and Growth Trust, which provides low- and zero-interest loans to low-income countries.
The IMF was also asking members to replenish the Catastrophe Containment and Relief Trust, a fund that provides grants for debt-service relief and cancellation to the poorest and most vulnerable member countries, she said.
Higher fuel and food costs, declining development assistance and subdued appetite for riskier investments were piling pressure on many of these countries, despite years of “hard work,” Georgieva said.
The IMF this week flagged significant growth and financial stability risks from a potential end of the AI investment boom, growing debt levels and a prolonged Middle East conflict. It forecast global growth at 3.1 percent for 2026. Nearly all developing economies were expected to see slower growth in 2026, it said.
Debt costs a barrier to growth
Officials from developing countries are warning that rising debt service costs, estimated at USD500 billion more than for advanced economies, pose a major barrier to inclusive growth.
“This puts a lot of burden on us because not only are we not able to invest in our infrastructure space or build the human capital formation, but debt service becomes a mandatory requirement,” Gambian Minister of Finance and Economic Affairs Seedy Keita said.
He noted the IMF was currently collecting more from loans to its members than it was lending, while developing countries were struggling with weaker balance sheets.
Cameroon’s finance minister, Louis Paul Motaze, speaking on behalf of more than a dozen other sub-Saharan African countries, said developing economies would continue to need support from international financial institutions, echoing Georgieva’s call for member states to top up funding for the PRGT and CCRT funds.
“Domestic resource mobilization, stronger debt management, and deeper domestic capital markets are indispensable, but domestic efforts alone may not be sufficient to close widening financing gaps,” he said in a statement to the International Monetary and Financial Committee released on Wednesday.
“Predictable concessional financing, stronger mobilization of private capital, and effective catalytic support from international financial institutions remain critical,” he said.
Georgieva said the IMF had restructured the PRGT, its fund for low-income countries, to triple lending to the countries, but members needed to honour their funding commitments, giving no details on missed or delayed pledges.
The IMF was also encouraging contributions to the CCRT, which she said was in urgent need of replenishment given frequent use of the facility in recent years.
Georgieva said she was optimistic that Senegal, the latest country to seek relief under the Group of 20 Common Framework for Debt Treatments, would get through the restructuring process quickly, noting that the IMF had reached staff-level agreement on a USD2.2 billion lending program for the West African country.