Higher interest rates elevate the risks of default for countries: IMF

Yahoo Finance's Akiko Fujita discusses a chart showing that IMF lending reached an all-time high in August.

Video Transcript

AKIKO FUJITA: It is time now for our chart of the day, and today, we are talking about global debt. Higher interest rates are adding to borrowing costs for countries around the world. And that has dramatically elevated the risks of default, prompting the International Monetary Fund to step in as a lender of last resort. The Financial Times reports lending at the agency has now reached an all-time high. That came at the end of August with a $140 billion dispersed across more than 40 separate programs.

That number's already exceeded the amount of credit outstanding at the end of 2020 and 2021. At least five countries have already been pushed into default. And with more expected to follow, there's concern the agency is reaching the limits of its lending capacity. The IMF's total commitments, which include loans that have not been disbursed, now stand at nearly $270 billion, Ines.

And we're talking about, obviously, a higher rate environment globally, but of course, a lot of this conversation goes back to what we've been talking about all throughout the last few weeks. It is a stronger dollar also adding to that debt load.

INES FERRE: That's right. It all circles back to the US dollar and the strength of the US dollar vis a vis the other currencies in the world and how foreign currencies have been sliding. And these companies-- or these countries abroad are-- they have their debt in dollars.

AKIKO FUJITA: Dollars and not paying debt.

INES FERRE: Exactly, and so that is more expensive for them. So, again, the impact that a strong US dollar is having abroad.

AKIKO FUJITA: Yeah, I mean, something-- the reason why we keep bringing it up every day, right?