IMF to Hold Debt Discussions With Egypt, Sri Lanka and Tunisia

(Bloomberg) -- The International Monetary Fund will sit down with countries including Sri Lanka, Egypt and Tunisia to discuss steps that need to be taken to help them as tighter financial conditions raise the cost of debt servicing, the institution’s chief said.

“The good news is that we see debt, we follow it, and we are already zeroing in on countries that are in need of debt restructuring,” IMF Managing Director Kristalina Georgieva said in an interview with Tom Keene on Bloomberg Television on Thursday. “We have to press for debt restructuring.”

She added that the IMF “will sit with Sri Lanka, we will sit with Egypt, we will sit with Tunisia, and we will discuss what realistically needs to be done,” she said, without saying that all three nations will require debt overhauls.

While Sri Lanka and Tunisia are among the dozen or so emerging markets with dollar-denominated government bonds that pay at least 1,000 basis points more than U.S. Treasuries -- above the threshold for debt to be considered distressed -- Egypt is not, according to data compiled by Bloomberg.

Finance ministers and central bankers from around the world are set to converge on Washington next week for IMF and World Bank Spring Meetings that start on Monday. Georgieva said in a speech on Thursday that Russia’s invasion of Ukraine and the subsequent impact, including uncertainty and inflation, is spurring the fund to lower the 2022 gross domestic product outlook for 143 of its 190 member nations -- a group that accounts for 86% of global output.

Sri Lanka needs between $3 billion and $4 billion this year to pull itself out of an unprecedented economic crisis and plans on April 18 to start talks with the IMF for help, the nation’s finance minister said Thursday. Egypt last month said that it’s seeking support from the IMF, while Tunisian central bankers are signaling that any economic rescue deal it seals with the fund won’t include restructuring its international debt, according to an investor briefed on its plans.

Georgieva said in her speech on Thursday that some nations will require debt restructuring, with 60% of low-income nations in or near debt distress.

On Sri Lanka, the nation “has appointed very prominent Sri Lankan economists to be advisers,” Georgieva said. “That gives me hope.”

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