Debt relief for the poorest countries amidst COVID-19 spread

Two Bretton Woods institution have called on all official bilateral creditors to suspend debt payments from International Development Assistance (IDA) countries that request forbearance.

The World Bank Group and International Monetary Fund (IMF) decision have become necessary due the Coronavirus outbreak, which is likely to have severe economic and social consequences for IDA countries to a quarter of the world’s population and two-thirds of the world’s population living in extreme poverty.

The call for suspension is expected to be consistent with national laws of the creditor countries.

“This will help with IDA countries’ immediate liquidity needs to tackle challenges posed by the coronavirus outbreak and allow time for an assessment of the crisis impact and financing needs for each country”, the institutions said in a joint statement issued last week.

“We invite G20 leaders to task the WBG and the IMF to make these assessments, including identifying the countries with unsustainable debt situations, and to prepare a proposal for comprehensive action by official bilateral creditors to address both the financing and debt relief needs of IDA countries,” the statement indicated.

The International financing institutions will seek endorsement for the proposal at the Development Committee during the Spring Meetings, which will be due from April 16 to April 17, 2020.

The World Bank Group and the IMF believe it is imperative at this moment to provide a global sense of relief for developing countries as well as a strong signal to financial markets. The international community would welcome G20 support for this Call to Action.

Finance Ministers across Africa in a statement, recently, called for a $100 billion stimulus package, including a suspension of debt service payments, to help the continent combat coronavirus.

Some US$44 billion would come from not servicing debt and they would also tap existing facilities in the World Bank, International Monetary Fund (IMF), African Development Bank (AfDB) and other regional institutions.

Africa is facing the combined shock of coronavirus, which threatens to strain under-funded health systems, as well as a sharp drop in revenues due to plunging oil and commodities prices.

Source: Adnan Adams Mohammed