International Monetary Fund (IMF) debt economist Chuku Chuku warned on Wednesday that the poorest countries could reach levels comparable to the systemic crisis of the 1990s if the current trend continues.

Speaking at a session of the Annual Meetings of the International Monetary Fund (IMF) and the World Bank, which are taking place this week in the Moroccan city of Marrakech, Chuku Chuku, quoted by Lusa, warned that "the window to avoid another systemic debt crisis is closing fast, and action must be taken now to prevent this from happening".

"Debt vulnerabilities in low-income countries [LICs] could reach levels comparable to those of the mid-1990s in the medium term, if the current trend continues and if there are no policies and reforms to address vulnerabilities, this is the bad news," said Chuku Chuku.

In the session entitled "Are we heading for another systemic debt crisis in the LICs?", Chuku Chuku replied that, despite the large debt vulnerabilities and the strong pressure felt by the poorest countries, among which there are many Africans, "the comparable data does not show that we are at the same point that forced the Debt Relief Initiative for Heavily Indebted Poor Countries (HIPC)", launched in the 1990s in the context of a systemic debt crisis, and "this is the good news".

The topic "that keeps policymakers and investors awake at night is the debt challenges in low-income countries and the actions needed to alleviate them," said the economist from the public debt division in the IMF's Strategy and Policy department, in a session that filled one of the largest rooms in the venue where the annual meetings are held.

Chuku Chuku said that studies show that "10 years after a Sovereign Default, the average citizen of that country can see their life expectancy reduced by 14 months", to emphasize that the issue is not only financial and has a concrete impact on people's lives, since the debt diverts resources that could be used for investments or for the social sector, such as Education or Health.

Public debt has risen consistently over the last decade, especially in recent years, when the ratio of debt to global GDP rose by one percentage point per year between 2010 and 2019 and then skyrocketed by 13 percentage points in 2020, due to the impacts of the pandemic," the economist pointed out.

"The last time we saw debt rising this fast, and with chronic structural challenges, was in the early 1990s, which eventually led to the HIPC in 1996," he warned.

However, "despite the high risks, debt vulnerabilities in low-income countries today are less alarming than they were, on average, in the mid-1990s," he added, presenting as an indicator the percentage of tax revenue that goes directly to paying off the debt, which in 1994 was 18%, and today is 10%, which compares, for example, with the 60% of tax revenue that Angola, Africa's largest Lusophone economy, channels directly into servicing public debt.

HIPC was an initiative launched in 1996 by the IMF, the World Bank and the African Development Bank, which made it possible to cancel 76 billion dollars, around 71.7 billion euros, to more than 40 countries in debt.