World Bank and IMF call for debt relief to help poorer countries fight coronavirus

Outbreak will have ‘severe economic and social consequences’ for nations with lowest incomes

The IIF's proposal that private creditors offer poorer nations debt holidays on a 'case-by-case' basis goes 'nowhere near responding to the unprecedented nature of the coronavirus debt crisis', said the head of the Jubilee Debt Campaign. AFP

Richer nations should agree to suspend debt repayments from the world’s poorest nations if asked for relief during the coronavirus, the International Monetary Fund and the World Bank said.

The coronavirus outbreak is likely to have “severe economic and social consequences” for IDA countries - a classification given to 76 of the world’s poorest nations defined by gross national income, with a gross national income threshold of just $1,175 (Dh 4,315.72) per capita.

“With immediate effect—and consistent with national laws of the creditor countries—the World Bank Group and the International Monetary Fund call on all official bilateral creditors to suspend debt payments from IDA countries that request forbearance,” the statement 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.”

IDA countries are home to one quarter of the world’s population, but two-thirds of the poorest. They include 39 African nations, Afghanistan, Bangladesh and Pakistan in South Asia as well as Syria and Yemen in the Middle East.

The IMF and World Bank volunteered to identify the countries with the most unsustainable debt levels and to prepare action plans through which bilateral creditors can address both the financing and debt relief needs of poorer nations.

“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,” the statement said.

Earlier this week, the IMF said the Covid-19 outbreak has become "the largest near-term challenge to the region", with three quarters of the countries in the IMF's Middle East and Central Asia region reporting confirmed cases and some facing major outbreaks.

Last week, the Washington-based lender said it was ready to mobilise $1 trillion to help nations combat the deadly outbreak as it called for a co-ordinated global fiscal stimulus to soften the economic blow.