Debt payments for the world’s most impoverished countries totalling £400 million have been cancelled to allow them to focus on dealing with coronavirus.
The International Monetary Fund (IMF) has approved the cancellation of six months of payments for 25 countries including Afghanistan, Madagascar and Rwanda.
Executive director Kristalina Georgieva said the funds would come from the organisation’s Catastrophe Containment and Relief Trust, which will use recent pledges of £150 million from the UK and £80 million from Japan.
She 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 25 countries include 19 from Africa, as well as Afghanistan, Haiti, Nepal, Solomon Islands, Tajikistan and Yemen.
UN secretary-general Antonio Guterres and a group of 165 former global leaders and prominent international figures have urged the suspension of debt repayments for the world’s poorest and most vulnerable countries so they can use their scant resources for the coronavirus crisis.
Eric LeCompte, executive director of Jubilee USA Network, an alliance of more than 75 US organisations and 700 faith communities working for debt relief, called the IMF announcement “an incredibly positive step”.
“Many of these countries have less than 50 critical care unit beds per country,” he said.
“These countries need to bolster their health systems right away and cancellation of debt for six months will help these countries.”
But Mr LeCompte said more needs to be done, adding: “As the poorest countries in the world, they really need full cancellation (of their debts).”
Meanwhile, the IMF said the world economy in 2020 will suffer its worst year since the Great Depression of the 1930s.
The fund said it expects the global economy to shrink 3% — far worse than its 0.1% dip in the Great Recession year of 2009 — before rebounding in 2021 with 5.8% growth. It acknowledges that prospects for a rebound next year are clouded by uncertainty.
The bleak assessment represents a breathtaking downgrade by the IMF. In its previous forecast in January, before Covid-19 emerged as a grave threat to public health and economic growth worldwide, the international lending organisation had forecast moderate global growth of 3.3% this year.
Far-reaching measures to contain the pandemic — lockdowns, business shutdowns, social distancing and travel restrictions — have brought economic activity to a near-standstill across much of the world.
“The world has been put in a great lockdown,” the IMF’s chief economist, Gita Gopinath, told reporters. “This is a crisis like no other.”