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UPDATE 1-IMF chief warns of "lost generation" if low-income countries don't get more help

Andrea Shalal
·2 min read

(New throughout, adds details and further comments)

By Andrea Shalal

WASHINGTON, Feb 5 (Reuters) - The head of the IMF on Fridayurged advanced economies to provide more resources to low-incomecountries, warning of an emerging "Great Divergence" in globalgrowth that could risk stability and trigger social unrest foryears to come.

International Monetary Fund Managing Director KristalinaGeorgieva told reporters that 50% of developing countries wereat risk of falling further behind, which raised concerns aboutstability and social unrest.

To avert bigger problems, she said rich countries andinternational institutions should chip in more. She also urgedheavily indebted countries to seek debt restructuring soonerrather than later, and to boost conditions for growth.

"Last year the main focus was on the 'Great Lockdown.' Thisyear we face the risk of 'Great Divergence,'" Georgieva toldreporters during a videoconference. "We estimate that developingcountries that have been for decades converging in income levelswill be in a very tough place this time around."

Setbacks for living standards in developing countries wouldmake it much more difficult to achieve stability and securityfor the rest of the world, she said.

"What is the risk? Social unrest. You can call it a lostdecade. It may be a lost generation," she said.

Georgieva said advanced economies had spent about 24% of GDPon average on support measures during the pandemic, compared to6% in emerging markets and 2% in low-income countries.

A former top World Bank executive, Georgieva saidvaccination efforts were uneven, with poor countries facing"tremendous difficulties" even as official development fundswere going down.

Only one country in Africa - Morocco - had begun vaccinatingits citizens, she said, citing grave concerns about increasedmortality in many African countries.

"We must do everything in our power to reverse thisdangerous divergence," she said, noting developing countriescould also miss out on a major shift underway in rich countriesto more digital and green economies.

She said accelerating vaccinations could add $9 trillion tothe global economy by 2025, with 60% of benefits going todeveloping countries.

Georgieva said she was still working with IMF shareholdersto win support for a new allocation of the IMF's own currency,or Special Drawing Rights (SDRs), which could provide resourcesto poorer countries.

Former U.S. President Donald Trump had blocked such a move,akin to a central bank printing money. Support from the UnitedStates, the IMF's dominant shareholder, is more likely underPresident Joe Biden whose administration is open to a newallocation, according to sources familiar with their views. TheBiden administration has not addressed the issue publicly.

Georgieva said an SDR allocation of $250 billion in 2009 hadhelped stabilize the global economy during the global financialcrisis, and the current situation was more grave.

She said the IMF was completing a periodic review oflong-term liquidity needs that might justify a new SDRallocation, but gave no further details.

Group of Seven finance officials will discuss a possible newSDR allocation when they meet on Feb. 12, the sources said.(Reporting by Andrea Shalal, Editing by Franklin Paul and DavidGregorio)