The IMF Has Finally Dumped a Damaging Orthodoxy

The International Monetary Fund long had an unyielding view of how global finance should work: Capital must flow freely across borders, no matter the consequences. It just took an important step away from that orthodoxy — and not a moment too soon for some developing nations.

Having barely weathered the Covid crisis, in part with the help of emergency lending and debt-service relief from their wealthier counterparts, the world’s low- and middle-income countries face another challenge: The cost of servicing their external debt — which amounted to about $9 trillion in 2020 — is set to increase sharply as central banks such as the U.S. Federal Reserve raise interest rates to combat inflation. In 2022 alone, public and private borrowers will have to pay almost $1 trillion, according to the World Bank.