World Bank, IMF advocate debt relief for poorest countries

ISLAMABAD: The World Bank Group and International Monetary Fund (IMF) in a joint statement on Wednesday called on all the official bilateral creditors to suspend debt payments from the International Development Association (IDA) countries that request forbearance in the wake of eruption of COVID-19 Virus.

Pakistan is also among the list of 76 countries that are eligible to receive the IDA resources under concessionary lending. Pakistan owed around $11 billion from official bilateral creditors of the Paris Club countries and Islamabad had once obtained debt relief in 2002-3 for 10 years when Pakistan had decided to stand by the US in itswar against terror in the aftermath of 9/11, 2001. During that period, Pakistan had enjoyed fiscal cushion on debt repayment front from official bilateral donors of Paris Club. Pakistan had to sign agreement with each country separately after striking agreement of getting concession from Paris Club. It is not yet known whether Islamabad would seek debt relief from official donors or not at this juncture as this correspondent made efforts to contract Federal Minister for Economic Affairs Hammad Azhar to get version and also sent him message but got no reply till filing of this report.

However, the World Bank Group and International Monetary Fund have issued a joint statement to the G20 concerning debt relief for the poorest countries and stated that the coronavirus outbreak is likely to have severe economic and social consequences for the IDA countries, home to a quarter of the world’s population and two-thirds of the world’s population living in extreme poverty.

It stated that 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. “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 joint statement added.

"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 the IDA countries. We will seek endorsement for the Proposal at the Development Committee during the Spring Meetings (April 16–17).

"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," it concluded.

Meanwhile, Federal Minister for Economic Affairs Hammad Azhar said that "We welcome joint statement of WB & IMF calling upon G20 countries to suspend debt payments of dev [developing] countries. PM Imran Khan has been urging this since COVID-19 pandemic. We hope it shall be accepted & we also urge multi-laterals for relief on their debts.”