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Governments should prepare to restructure, liquidate badly scarred firms

by Mike Robinson

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© Reuters. FILEPHOTO: This is the International Monetary Fund’s logo outside Washington, U.S.A. on September 4, 2018. REUTERS/Yuri Gripas/File Photo

WASHINGTON (Reuters] – As governments withdraw large amounts of support given during the COVID-19 crisis’ height, they should improve their insolvency system and plan to restructure/liquidate companies that are badly insolvent.

International Monetary Fund reported that corporate debt reached $83 Trillion, 98% of world gross domestic product at the close of 2020. China’s advanced economies contributed 90% to nearly $9 trillion of this increase.

Now that central banks are raising interest rates to check inflation, firms’ debt servicing costs will increase and declining fiscal support will expose corporate vulnerabilities, the IMF said.

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