Kenya, Tanzania, Uganda, Rwanda, Burundi, and South Sudan are among the 76 states that are likely to receive debt relief from bilateral creditors following a proposal made by the World Bank and the International Monetary Fund.
In a joint statement issued Wednesday, the two urged all official bilateral creditors to suspend debt payments from the world’s poorest countries (IDA) if requested.
“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 IMF and the World Bank said.
“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 International Development Association (IDA) is the part of the World Bank that helps the world’s poorest countries.
IDA is one of the largest sources of assistance for the world’s 76 poorest countries and is the single largest source of donor funds for basic social services in these countries.
IDA lends money on concessional terms. This means that IDA credits have a zero or very low-interest charge and repayments are stretched over 30 to 38 years, including a 5- to 10-year grace period. IDA also provides grants to countries at risk of debt distress.
No African country can afford to make any debt repayments in 2020
On the other hand, Oxfam International is calling on the G20 leaders to suspend all debt payments and in some cases issue cancellation.
“No African country can afford to meet its debt obligations at least in 2020 without putting millions of lives at risk,” said Oxfam in a statement.
According to Oxfam, Africa is facing its worst crisis in decades. The COVID 19 pandemic comes at a time when African countries were already facing financial distress due to ballooning debt payments. It’s now more than ever that the continent needs to use all the available resources to respond to this life-threatening health pandemic and economic recession.
Peter Kamalingin, Oxfam Pan Africa Director said: “This is the moment that Africa needs to use all its existing resources to cope with the emergency. It makes no sense for African countries to transfer much-needed resources to foreign banks, developed nations with capacity to cope with the pandemic, or international institutions.”
In appreciating the call for action from IMF and the World Bank, Oxfam says it is a ‘ first step, but do not meet the needs of African people in this life-threatening crisis’.
The proposal by the WB and IMF that “only bilateral debts need to be suspended” will guarantee much-needed money continues to flow out of the continent (multilateral and private lenders hold most of the debts).
“No African country can afford to make any debt repayments in 2020 – whether owed to bilateral creditors, multilateral institutions or private lenders without putting millions of African lives at risk. New money will not be available for refinancing at least in the short term and most likely in the medium term. A universal debt repayment suspension needs to be put in place to allow African countries to focus in strengthening their public health systems to adequately respond to the COVID-19 crisis and provide social protection to the most vulnerable. Suspending all debt payments is the fastest way to keep money in countries and free up resources to tackle the health and economic crises.”