IMF boost to country reserves no panacea for debt outlook -Fitch

NEW YORK, March 18 (Reuters) – A half-trillion dollar proposed boost in allocations from the International Monetary Fund would help emerging and frontier economies deal with the short-term impact of COVID-19, but it will not guarantee a healthy debt-servicing outlook, Fitch Ratings said on Thursday.

G7 advanced economies are currently discussing a proposal to boost IMF reserves for pandemic relief, but no deal has been struck. The G7 has a meeting scheduled on Friday in which the subject of help for low-income countries is expected to be discussed.

The proposed reserves boost, which Fitch sees at $500 billion but could reach closer to $650 billion, “will help countries to deal with immediate external financing pressures, but is insufficient to alleviate broader debt service challenges,” it said in a report.

The added reserves also would not significantly improve countries’ credit ratings, said Fitch.

Last month, a Morgan Stanley analysis of IMF data showed Venezuela would be the largest benefactor of a fresh allocation in terms of percentage of gross domestic product, followed by Zambia, Suriname and Bahrain.

In terms of a boost to reserves, a Citi analysis last month showed the largest percentage increase by far would be for Zimbabwe, followed by Chad, Zambia and Ecuador.

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