Low-income, vulnerable states: IMF urges members to stock up funds

IMF chief Kristalina Georgieva warned on Wednesday that the rapid rise of artificial intelligence, combined with current economic trends, could widen the gap between advanced and developing nations. Georgieva, the first IMF chief from a developing country, noted that rising benchmark yields in advanced economies are pushing down into emerging markets and low-income countries.

She reported that average debt service costs have risen to 14 percent of revenue in recent years, up from 6 percent a decade ago, even though overall debt burdens have eased.

The IMF chief stated that the risk of divergence is most severe for those that are already behind. During an annual meeting press conference in Bangkok, Thailand, Georgieva called on IMF member states to fulfill their pledges to increase funding for the Poverty Reduction and Growth Trust (PRGT) and the Catastrophe Containment and Relief Trust (CCRT), which provide low- and zero-interest loans and grants to the poorest and most vulnerable member countries.

She highlighted that higher fuel and food costs, declining development assistance, and a lack of appetite for riskier investments are putting additional pressure on these countries.

Developing economies are facing significant growth risks due to potential slowdown in AI investment, increasing debt levels, and a prolonged Middle East conflict. The IMF forecasts global growth at 3.1 percent for 2026, with nearly all developing economies expected to see slower growth. Georgieva emphasized that rising debt service costs pose a major obstacle to inclusive growth, stating that it creates a heavy burden since it prevents investment in infrastructure and human capital. She noted that debt service now constitutes a mandatory requirement for many low-income countries.

Officials from developing countries stress that higher debt service costs are a significant barrier to inclusive growth, as it prevents the allocation of resources towards infrastructure development and human capital formation. They argue that despite efforts to strengthen domestic resource mobilization, debt management, and capital markets, domestic efforts alone may not be enough to bridge the widening financing gaps.