The International Monetary Fund and the World Bank have established a new approach to what they view as a pervasive liquidity crisis in many low-income countries and some emerging markets. According to this assessment, many countries are simply facing a short-term liquidity problem led by a concentration of debt service payments at a moment when creditors are not willing to extend additional lending.
The proposed approach has three pillars: first, an IMF reform programme; second, supplementing this with concessional financing from development banks and donors; and third, hoping that the private sector will return to the country – potentially with some incentives.
However, injecting more liquidity into LICs and EMs may pile on…
