By Andrea Shalal and David Lawder
BANGKOK, Oct 14 (Reuters) - IMF chief Kristalina Georgieva on Wednesday warned that current economic developments and the rapid advance of AI threaten to deepen the gulf between advanced and developing economies, especially given steep drops in development assistance.
She said the International Monetary Fund recognized its responsibility to help finance countries when needed, and urged IMF member states to make good their pledges to increase funding for its Poverty
Reduction and Growth Trust, which provides low- and zero-interest loans to low-income countries.
The IMF was also asking members to replenish the Catastrophe Containment and Relief Trust, a specialized fund that provides grants for debt-service relief and cancellation to the poorest and most vulnerable member countries, she said.
Georgieva, the first IMF chief from a developing country, said higher benchmark yields in advanced economies were spilling over to emerging markets and low-income countries. Average debt service costs had increased to 14% of revenue from 6% a decade ago, even as overall debt burdens have eased, she said.
"The risk of divergence is most dangerous for those that are already further behind," she told a press conference during the annual meetings of the IMF and World Bank in Bangkok, Thailand.
Higher fuel and food costs, declining development assistance and subdued appetite for riskier investments were piling pressure on many of these countries, despite years of "hard work," she said.
The IMF this week flagged significant growth and financial stability risks from a potential end of the AI investment boom, growing debt levels and a prolonged Middle East conflict. It forecast global growth at 3.1% for 2026. Nearly all developing economies were expected to see slower growth in 2026, it said.
Officials from developing countries are warning that rising debt service costs pose a major barrier to inclusive growth.
Nigerian Finance Minister Taiwo Oyedele, who chairs the Group of 24 developing nations, on Tuesday said developing countries were paying $500 billion more for their debt than developed countries, despite facing widening budget deficits.
Advanced economies like the US were the "worst offenders" in failing to rebuild fiscal buffers since the COVID pandemic, while many developing countries had worked to increase their resilience by strengthening their institutions, Georgieva said.
The IMF had restructured the PRGT, its fund for low-income countries, to triple lending to the countries, but members need to honour their funding commitments, she said, giving no details on missed or delayed pledges.
The IMF was also encouraging contributions to the CCRT, which she said was in urgent need of replenishment given frequent use of the facility in recent years.
Georgieva said she was optimistic that Senegal, the latest country to seek relief under the Group of 20 Common Framework for Debt Treatments, would get through the restructuring process quickly, noting that the IMF had reached staff-level agreement on a $2.2 billion lending program for the West African country.
(Reporting by Andrea Shalal; Editing by John Mair and Shri Navaratnam)
