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IMF steering committee warns of 'long-lasting scars' on world economy

This undated file photo shows International Monetary Fund Managing Director Kristalina Georgieva. (Kyodo)

WASHINGTON (Kyodo) -- The policy-setting body of the International Monetary Fund on Thursday warned that the coronavirus pandemic could leave "long-lasting scars" on the global economy, such as through weaker productivity growth and heavier debt burdens.

    "A tentative global economic recovery is underway, supported by extraordinary macroeconomic policy responses. But the recovery is partial, uneven, and marked by significant uncertainty," the International Monetary and Financial Committee said in a communique released after its meeting.

    The committee also urged increased participation from private creditors in a debt relief program for poor nations to allow them to continue to take measures against the pandemic.

    "We are disappointed by the absence of progress of private creditors' participation" in the debt payment suspension initiative, the committee said, while welcoming an agreement reached a day before by the finance chiefs of the Group of 20 major economies to extend the program by six months beyond the end of the year.

    The Debt Service Suspension Initiative was launched in May by the G-20 and Paris Club traditional creditor nations amid the pandemic, which has forced countries around the world to spend more to mitigate the health and economic effects of the crisis and has left vulnerable countries facing higher financing costs.

    While China is a major creditor to the developing world, concerns are growing over Beijing's inadequate participation in the initiative as its government-affiliated financial institutions continue to receive massive debt service payments by being classified as commercial lenders.

    Commercial lenders are only called upon to provide relief on equal terms to bilateral "official" creditors.

    The committee said in the communique that it "strongly" encourages private creditors to "participate on comparable terms when requested by eligible countries" and also seeks "the full participation of official bilateral creditors."

    Calling the current situation "a crisis like no other," IMF chief Kristalina Georgieva called for stronger international cooperation, especially on vaccine development and distribution, to ride out the ongoing risks.

    "Faster progress on medical solutions could speed up the recovery; it could add almost $9 trillion to global income by 2025," she said at a virtual press conference, adding, "This, in turn, could help narrow the income gap between richer and poorer nations. The value of cooperation right now cannot be overstated."

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