The World Bank Group and International Monetary Fund, with immediate effect, have called on all official bilateral creditors to suspend debt payments from International Development Assistance (IDA) countries that request forbearance.
This decision has become necessary due the coronavirus outbreak, which is likely to have severe economic and social consequences for IDA countries, home to a quarter of the world’s population and two-thirds of the world’s population living in extreme poverty.
In a joint statement issued on March 25, 2020, the Bretton Woods Institutions said, “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 call for suspension is expected to be consistent with national laws of the creditor countries.
“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 two institutions said in a statement.
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.
US$ 100 billion stimulus, Debt Holiday
Late week, Finance Ministers across African in a statement 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.