World risks economic scarring if support removed too soon: IMF's Georgieva

FILE PHOTO: IMF Managing Director Kristalina Georgieva speaks at the Global Women's Forum in Dubai, United Arab Emirates, February 16, 2020. REUTERS/Christopher Pike

(Reuters) - Countries across the world risk facing massive bankruptcies and economic scarring if fiscal and monetary support deployed to support their economies through the current crisis is removed too soon, IMF Managing Director Kristalina Georgieva said on Tuesday.

“We are very clear in the message we are communicating to not withdraw support prematurely,” Georgieva said at an online event marking the 125th anniversary of the London School of Economics. “If we do so, then we risk massive bankruptcies and massive unemployment.”

Georgieva said the International Monetary Fund does not see an exit from the current crisis next year, so debt service suspension for poor countries must also be continued.

She said tax reform is critical to help countries service debt obligations, adding that very low, negative interest rates can be helpful to nurse economies through the pandemic but pose increased risks for savers and the banking system.

Reporting by David Lawder, Andrea Shalal and Rodrigo Campos; Editing by Chizu Nomiyama