The IMF has granted an estimated $214m in debt relief to 25 of the world’s poorest countries by cancelling repayments owed to the Fund for the next six months, allowing them to use the money to fight coronavirus instead.
Most of the countries covered by the grant are in sub-Saharan Africa, with others in Asia and the Caribbean.
The announcement comes ahead of a much larger debt suspension plan covering an estimated $18bn in repayments of official bilateral debt which the G20 group of the world’s richest advanced and developing countries is expected to announce at the IMF and World Bank spring meetings later this week, although there is no suggestion these debts will be cancelled outright.
Kristalina Georgieva, the IMF’s managing director, said: “This provides grants to our poorest and most vulnerable members to cover their IMF debt obligations for an initial phase over the next six months and will help them channel more of their scarce financial resources towards vital emergency medical and other relief efforts.”
The IMF did not say how much money was involved, but the Jubilee Debt Campaign, a charity, calculated from IMF data that the countries would be spared repayments of $214m over the period.
Sarah-Jayne Clifton, director of Jubilee Debt Campaign, said: “This debt cancellation helps keep money in countries so it can be used for urgent health spending and social protection. Crucially, the payments are being cancelled rather than rolled into the future.”
However, she called on the IMF to go much further and cancel debts owed by a larger group of developing countries in the coming year.
The IMF will give grants to the 25 countries from a catastrophe trust, the CCRT, which funds IMF repayments by poor countries hit by natural disasters. The CCRT can provide a maximum of $500m, including a recent $185m pledge by the UK and $100m from Japan.
Such assistance is dwarfed by other debt repayments which will fall due in the coming months.
Analysts estimate that 76 of the world’s poorest nations, which are eligible to receive the bank’s International Development Association (IDA) funding, are due to make repayments of about $40bn to external creditors this year. Of this total, repayments to the IMF, World Bank and other multilateral lenders are estimated to represent about $13bn.
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The Institute of International Finance, an industry association, estimates that lower income nations will owe repayments of a further $130bn on domestic debts this year.
The IMF and World Bank have access to $260bn in emergency funding which they can make available to IDA countries. So far the IMF has approved loans totalling $3.4bn to 12 countries in sub-Saharan Africa and eastern Europe to tackle the Covid-19 outbreak, and requests from another six including Nigeria, Pakistan and Colombia are pending approval.