The globe could face an emerging-market debt crisis as money flows from these countries to the developed world.
The warning comes from the head of the International Monetary Fund (IMF), Kristalina Georgieva.
Speaking ahead of major IMF and World Bank meetings, Georgieva said that rising bond yields in interest rates in the developed world could see a significant outflow of cash from emerging markets. She said that the hardest-hit would be middle-income countries with ‘large external finance needs and elevated debt levels’.
She also said that many middle-income countries relied on tourism for significant revenue and this was a sector hit hard by the Covid-19 emergency, and one that would take longer to recover than other sectors.
Georgieva said the global recovery from the economic crisis brought on by the Covid-19 pandemic was stronger than expected, partly thanks to the American stimulus package implemented by US President Joe Biden. She also said that without a co-ordinated global response the world would have suffered an economic contraction not seen since the Great Depression.
She said that the roll-out of Covid-19 vaccines would play an important role in allowing economies to recover from the impact of the pandemic and the related lockdowns.
[Image: Rudolfs Klintsons from Pixabay]