Debt relief

WB, IMF will also seek endorsements for the proposal at their combined meetings in April

Even the World Bank and the International Monetary Fund (IMF) have officially begun calling on bilateral creditors to provide immediate debt relief to the world’s poorest countries as they face being overwhelmed by the Covid-19 coronavirus. Much of the developed world is already struggling — both economically and in terms of public health — and as the number of cases around the developing world rises, even worse outcomes are likely. Most developing countries lack the healthcare systems and economic stability of the developed world, making the potential risks even more significant. The two international financial institutions also argue that the suspension of debt payments would send a strong signal to financial markets in the countries in question and, thereby, help their economies.

A joint statement issued by the World Bank and the IMF has called upon official bilateral creditors to immediately suspend debt payments from the 76 International Development Association (IDA) countries, if requested. Pakistan is one of them, receiving support most notably for education, skills development, environment-related projects, and the Benazir Income Support Programme which is a poverty alleviation project catering to nearly 5.2 million people belonging to low-income group. The IDA is a member of the World Bank group that provides affordable development financing to countries whose credit risk is so high that they cannot afford to borrow commercially or from the World Bank’s other programmes.

The goal of the debt relief would be to help IDA countries’ maintain some immediate liquidity to tackle challenges posed by the coronavirus outbreak and allow time to assess each country’s individual crisis impact and financing needs. Any such deal would, however, require the backing of major economies, many of which are not in a position to increase their financial aid burden amid the increased stress of domestic stimulus packages necessitated by the mushrooming virus. The World Bank and the IMF was all set to make a direct pitch to G20 leaders at a virtual summit later in the day yesterday where a global action plan to deal with the worsening pandemic is already at the top of the agenda. They two global lenders will also seek endorsements for the proposal at their combined meetings in April.

Published in The Express Tribune, March 27^th, 2020.

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