The heads of the World Bank and the International Monetary Fund (IMF) on Friday underscored the need to provide debt relief to poorer countries hit by the coronavirus pandemic, and said official bilateral creditors would have to play a major role.
The IMF and the World Bank have both launched emergency programmes to offer grants and loans to member countries, with a heavy focus on developing countries and emerging markets, some of which are already in debt distress. They have also called on official bilateral creditors to provide immediate debt relief to the world’s poorest countries.
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“Poorer countries will take the hardest hit, especially ones that were already heavily indebted before the crisis,” the World Bank’s 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.
Malpass said the bank had emergency operations under way in 60 countries, and its board was considering the first 25 projects valued at nearly $2bn under a $14bn fast-track facility to help fund immediate healthcare needs.
The World Bank was also working with 35 countries to redirect existing resources to address the pandemic, with almost $1bn of those projects already approved. Overall, the bank plans to spend $160bn 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 $14bn in 2020, including interest and amortisation payments, Malpass said.
Less than $4bn of that total $14bn was owed to the United States and other Paris Club members. China, a major creditor, is not a member of the Paris Club – an informal group of creditor nations working to solve the payment problems faced by debtor nations.
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 Group of 20, and in the Paris Club. But she noted 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,” Georgieva said. “The same way the fund during the global financial crisis brought together both official creditors and private creditors to assess a good pathway through a dramatic crisis, we have to do it this time around as well.”