Commercial creditors ‘must sign global debt deal’ – or forgo Covid-19 aid | International Monetary Fund (IMF)
Commercial creditors to whom poor countries owe money should only be eligible for government Covid-19 cash bailout if they agree to subscribe to a comprehensive plan global debt agreementsaid the head of one of the world’s leading charities.
Despite the signs that the G20 A group of developed and developing nations are moving towards an agreement on aid to the most vulnerable nations, Inger Ashing, chief executive of Save the Children International, said the plan would only be fully effective if it included the sector private.
Ashing said in an open letter to the G20 that commercial creditors, such as banks, commodity traders and asset management firms, accounted for almost half of the $62 billion debt payments (42, £2 billion) that were to be made by the 75 poorest countries in the world. in 2020.
G20 governments are expected to suspend debt payments for six months at a virtual meeting on April 15, but Ashing said that didn’t go far enough. Granting trade creditors an exemption from any debt relief initiative would be “the financial equivalent of pouring water into a bucket with big holes”, he said.
“Official creditors should make it clear that they expect commercial creditors to apply comparable treatment. If necessary, governments should encourage participation by making access to special Covid-19 financing programs conditional on the participation of commercial creditors in the debt freeze,” she said.
Ashing said without a comprehensive plan, there was a “real and present” danger of a lost decade for development, marked by the reversal of gains made in health, nutrition, education , poverty reduction and other goals over the past 30 years.
the International Monetary Fund and the World Bank, which are holding virtual meetings this week, have pressured sovereign creditors to accept debt relief. Using money provided by Japan and the United Kingdom, the IMF announced on April 13 that it would cancel $215 million in debt payments for 25 countries over the next six months.
Nadia Daar, head of Oxfam International’s office in Washington DC, said the IMF should sell off some of its gold reserves, which have risen in value by $20 billion since the start of the Covid-19 crisis , to finance a more generous package.
“Poor countries with fragile health systems are drowning in debt. As gold prices hit seven-year high, IMF should use windfall profits from gold sales for debt cancellation to avert catastrophic loss of life in developing countries,” Daar said.
Sarah-Jayne Clifton, Director of Jubilee Debt Campaign, said: “The IMF announcement is welcome. This debt cancellation helps keep money in countries so it can be used for urgent health spending and social protection. Importantly, payments are canceled rather than deferred to the future.
“However, the scale of the economic crisis facing developing countries compels the IMF to go much further. The IMF sits on $27 billion in reserves and over $135 billion in gold. It can afford to cancel more debt, and now is the time to do it. We need the cancellation of payments to be extended to a much larger group of developing countries and be for the next full year.
“Beyond the IMF, debt cancellation must cover payments to all creditors, including the private sector, alongside the launch of a process to determine how to bring debts down to a sustainable level once the crisis hits. completed.”