Opening Remarks By Christine Lagarde, IMF Managing Director
Delivered at the Sovereign Debt Conference, Washington, DC
Our principal responsibility is to maintain the stability of the international financial system—and healthy sovereign borrowers are the bedrock of that system.
", "authors": [ "Christine Lagarde" ], "publishDate": "2018-09-13", "sections": [ { "heading": "Context and purpose", "content": "- Opening Remarks by Christine Lagarde, IMF Managing Director, delivered at the Sovereign Debt Conference, Washington, DC, September 13, 2018.\n- Principal objective: maintain the stability of the international financial system by strengthening the health of sovereign borrowers.\n- Conference focus: using current global growth momentum to bolster the health of sovereign debtors and inform an upcoming book building on the conference." }, { "heading": "Recent debt dynamics and vulnerabilities", "content": "- Global and historical context:\n - Advanced economies: public debt at levels not seen since the Second World War.\n - Emerging markets: public debt at levels last seen during the 1980s debt crisis.\n- Low-income countries (LICs):\n - This concerns 59 economies that make up 20 percent of the global population.\n - Median debt level among LICs increased from 33 percent of GDP in 2013 to 47 percent.\n - We estimate that 40 percent of low-income countries already face significant debt challenges.\n- Drivers of the buildup:\n - 2008 financial crisis and post-crisis policy responses (especially in advanced economies).\n - Rapid spending growth in emerging markets and LICs, only partly used for public investment.\n - Shocks: low export prices for commodity producers, natural disasters, conflicts, epidemics.\n - Ample global liquidity facilitating easier borrowing.\n - Shift in creditor base: increased reliance on non-traditional lenders (bond investors, foreign commercial banks, commodity traders, creditor countries outside the Paris Club), which generally implies higher interest rates and shorter maturities and complicates creditor coordination.\n- Risks from high debt:\n - Greater vulnerability to sudden tightening of global financial conditions and higher interest costs.\n - For emerging market and frontier economies: potential for market corrections, sharp exchange rate movements, and weakening capital flows.\n - High debt service crowds out spending on infrastructure, health, and education and creates uncertainty that deters investment and innovation." }, { "heading": "Key measurement and transparency shortcomings", "content": "- Governance and reporting gaps can produce “debt surprises” driven by poor governance, off-balance sheet borrowing, and weak debt recording and reporting.\n- Specific reporting gaps highlighted:\n - One third of low-income countries do not report debt guarantees for state-owned enterprises.\n - Fewer than one in ten report debt of public enterprises.\n- IMF activity:\n - Conducted assessments in 55 low-income countries last year.\n - Rolling out a new enhanced debt sustainability framework for LICs that:\n - Brings out the economic assumptions behind the analysis.\n - Clarifies the obligations covered.\n - Includes stress tests that highlight vulnerabilities particularly relevant for LICs (natural disasters and commodity price shocks)." }, { "heading": "Policy priorities and recommendations", "content": "- Overarching aim: build trust in sovereign debtors through sustainability, transparency, and collaboration.\n- Priority 1 — Make borrowing more sustainable:\n - Proceed prudently in taking on new debt.\n - Focus more on attracting foreign direct investment.\n - Boost tax revenues at home.\n - Prioritize investment projects with credibly high rates of return.\n - Increase lender responsibility to assess the impact of new loans on borrower debt positions before lending.\n- Priority 2 — Strengthen rigor and transparency in borrowing and lending:\n - Significantly strengthen institutions that record, monitor, and report debt in individual countries.\n - Improve public disclosure of debt contracts by both borrowers and lenders to reduce risk and increase accountability.\n - IMF to work closely with member countries to bolster debt recording and management capacity and governance frameworks.\n - Use the enhanced debt sustainability framework to surface risks and assumptions.\n- Priority 3 — Encourage stronger collaboration between borrowers and lenders:\n - Improve disclosure practices jointly by borrowers and lenders.\n - Develop new approaches to official creditor coordination to address substantial non-Paris Club debt and facilitate debt restructuring processes.\n - Address obstacles that inhibit smooth debt restructurings so the IMF can play its traditional role in providing financial support and acting as a catalyst for additional flows, including from the World Bank and other major lenders.\n - IMF engagement: providing advice and a platform for dialogue to support reform and coordination." }, { "heading": "Conference outcomes and next steps", "content": "- Topics highlighted for further discussion and research:\n - How fast public debt should be reduced.\n - The best conventional and unconventional tools for debt reduction.\n - How to encourage more effective debt restructuring processes, especially involving non-traditional creditors.\n- Follow-on publication:\n - An upcoming book, co-edited by Ken Rogoff, Ali Abbas, and Alex Pienkowski, will build on the conference.\n\nOpening Remarks by Christine Lagarde, IMF Managing Director, Sovereign Debt Conference, Washington, DC, September 13, 2018.\n\n---\n\n\n References\n\n- Christine Lagarde\n- Conference on Sovereign Debt: A Guide for Economists and Practitioners\n- Proposals for a Sovereign Debt Restructuring Mechanism (SDRM) -- A Factsheet\n- Speeches\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2018/09/13/managing-debt-vulnerabilities-in-lics" } ], "bullets": [ "[Markdown version](/en/news/articles/2018/09/13/managing-debt-vulnerabilities-in-lics/index.md)", "[Structured JSON version](/en/news/articles/2018/09/13/managing-debt-vulnerabilities-in-lics/index.json)", "[Bundle manifest](/en/news/articles/2018/09/13/managing-debt-vulnerabilities-in-lics/bundle-manifest.json)", "Authors: Christine Lagarde", "Published: September 13, 2018", "Opening Remarks by Christine Lagarde, IMF Managing Director, delivered at the Sovereign Debt Conference, Washington, DC, September 13, 2018.", "Principal objective: maintain the stability of the international financial system by strengthening the health of sovereign borrowers.", "Conference focus: using current global growth momentum to bolster the health of sovereign debtors and inform an upcoming book building on the conference.", "Global and historical context:", "Low-income countries (LICs):", "Drivers of the buildup:", "Risks from high debt:", "Governance and reporting gaps can produce “debt surprises” driven by poor governance, off-balance sheet borrowing, and weak debt recording and reporting.", "Specific reporting gaps highlighted:", "IMF activity:", "Overarching aim: build trust in sovereign debtors through sustainability, transparency, and collaboration.", "Priority 1 — Make borrowing more sustainable:", "Priority 2 — Strengthen rigor and transparency in borrowing and lending:", "Priority 3 — Encourage stronger collaboration between borrowers and lenders:", "Topics highlighted for further discussion and research:", "Follow-on publication:", "[Christine Lagarde](https://www.imf.org/en/About/senior-officials/Bios/christine-lagarde)", "[Conference on Sovereign Debt: A Guide for Economists and Practitioners](https://www.imf.org/en/news/seminars/conferences/2018/05/24/sovereign-debt-a-guide-for-economists-and-practitioners)", "[Proposals for a Sovereign Debt Restructuring Mechanism (SDRM) -- A Factsheet](https://www.imf.org/external/np/exr/facts/sdrm.htm)", "[Speeches](https://www.imf.org/en/news/searchnews)", "[PRESS CENTER](http://presscenter.imf.org/)", "[https://www.imf.org/en/home](https://www.imf.org/en/home)" ], "alternates": { "markdown": "/en/news/articles/2018/09/13/managing-debt-vulnerabilities-in-lics/index.md", "json": "/en/news/articles/2018/09/13/managing-debt-vulnerabilities-in-lics/index.json", "bundleManifest": "/en/news/articles/2018/09/13/managing-debt-vulnerabilities-in-lics/bundle-manifest.json" }, "generatedAtUtc": "2026-09-25T22:10:17.507Z" }