IMF extends debt relief of $124m for 24 low-income countries

The move helps free up money for spending on health, social and economic support to mitigate the impact of the pandemic

People walk past a poster announcing the annual meetings of The World Bank and International Monetary Fund (IMF) outside the IMF headquarters in Washington on October 7. The IMF extended debt relief to 24 low-income countries. AFPShow less

The International Monetary Fund's executive board approved the extension of $124 million in debt relief to 24 eligible low-income countries until January 10, suspending debt servicing by the states for the next three months.

Approval of the fourth tranche of debt service relief from the Catastrophe Containment and Relief Trust (CCRT) brings the total debt relief since April 2020 to $973m, the Washington-based lender said in a statement. The three previous tranches were approved on April 13, 2020, October 2, 2020, and April 1.

"This debt service relief helps free up scarce financial resources for vital health, social, and economic support to mitigate the impact of the Covid-19 pandemic," the fund said. "Subject to the availability of sufficient resources in the CCRT, debt service relief for all beneficiary countries could be provided for the remaining period from January 11 to April 13, 2022."

Across the world, but especially in developing regions, the damage from the Covid-19 pandemic has been greater than that from the 2008-2009 global financial crisis, most notably in Africa and South Asia, according to the UN Conference on Trade and Development. Renewed international support is needed for developing countries facing the threat of a "lost decade" amid an uneven global economic recovery, it said last month.

The recovery from the Covid-19 pandemic remains “hobbled” and the world economy could sustain as much as $5.3 trillion in losses over the next five years if the vaccine divide is not reduced, the IMF said.

In March 2020, at the start of the pandemic, the IMF's managing director Kristalina Georgieva began an urgent fundraising effort to raise $1.4 billion in grants to help the CCRT provide debt relief for up to a maximum of two years, while leaving the trust sufficiently funded for future needs.

So far, donors have pledged contributions totalling about $860m, including from the EU, the UK, Japan, Germany, France, the Netherlands, Spain, Switzerland, Norway, Singapore, Greece, China, Mexico, the Philippines, Sweden, Bulgaria, Luxembourg, and Malta, the IMF said.

The fund's executive board emphasised that "additional resources are needed to ensure that adequate grant resources are in place for other CCRT qualifying shocks in the future while continuing to provide debt service relief for the remaining period through April 2022".

The resources freed up so far by CCRT debt service relief have helped mitigate the impact of the pandemic on the recipient countries, the directors said.

The IMF executive board also approved the inclusion of the Kyrgyz Republic and Lesotho among the beneficiary countries, enabling the two countries to receive relief of their debt service.

The IMF did not name other countries that will receive debt relief during the fourth tranche. However, the fund said Afghanistan is not included in this latest round because of its suspended interaction with the Taliban-led government in Kabul.

"There remains a lack of clarity within the international community regarding the recognition of the government in Afghanistan. As such, the Fund’s engagement with Afghanistan continues to be on pause. Therefore, approval of a fourth tranche of debt relief for Afghanistan was not proposed at this stage," it said.