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Global lenders seek debt relief for poor countries hit by virus

BUSINESS
By Reuters | March 30th 2020
World Bank chairman David Malpass (L) is welcomed by Japan's Prime Minister Shinzo Abe to the G20 Summit in Osaka on June 28, 2019. [AFP]

The heads of the World Bank and International Monetary Fund have underscored the need to provide debt relief to poorer countries hit by the coronavirus pandemic, and said official bilateral creditors will have to play a major role.

The IMF and World Bank have each launched emergency programmes to offer grants and loans to member countries, with a heavy focus on developing countries and emerging markets, some which are already in debt distress.

Immediate relief

They have also called on official bilateral creditors to provide immediate debt relief to the world’s poorest countries.

“Poorer countries will be the hardest hit, especially ones that were already heavily indebted before the crisis,” World Bank president David Malpass told the International Monetary and Financial Committee, the steering committee of the IMF.

"Many countries will need debt relief. This is the only way they can concentrate any new resources on fighting the pandemic and its economic and social consequences,” he said, according to a text of his remarks.

Mr Malpass said they had emergency operations underway in 60 countries, and its board was considering the first 25 projects valued at nearly $2 billion (Sh218 billion) under a $14 billion (Sh1.4 trillion) fast-track facility to help fund immediate health-care needs.

The World Bank was also working with 35 countries to redirect existing resources to the pandemic, with almost $1 billion (Sh106 billion) of those projects already approved.

Overall, the bank plans to spend $160 billion (Sh16.9 trillion) over the next 15 months, he said.

Malpass said the IMF and World Bank would present a joint plan for debt relief at the institution’s virtual Spring Meetings in April, but gave no details.

The poorest countries face official bilateral debt service payments of $14 billion in 2020, including interest and amortisation payments, Malpass said, of which less than $4 billion (Sh418 billion) was owed to the United States and other Paris Club members. China, a major creditor, is not a Paris Club member.

Share of debt

Given the large share of debt held by official bilateral creditors, Malpass said it was critical to ensure their “broad and equitable participation” in addressing the crisis.

The IMF’s managing director, Kristalina Georgieva, warned that half of the low-income countries were already in “high debt distress” and much would depend on the official creditors.

She said there were already discussions among the world’s 20 largest economies, the G20, and the Paris Club, but there would also be a role for private creditors, as was the case during the global financial crisis of 2008-2009.

“The sooner we do it, the better,” she said.

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