Government ministers of poor and indebted nations will this week appeal to their creditors for a much more ambitious debt relief effort as they grapple with the health care and economic consequences of the coronavirus pandemic.<\/p>\n
They will set out their case for greater support from foreign governments and multilateral lenders as delegates gather for the annual meetings of the IMF and World Bank, according to Financial Times.<\/p>\n
Financial assistance for cash-strapped governments has so far fallen well short of what is needed \u2014 and of what advanced economies have been willing to do for themselves \u2014 according to critics.<\/p>\n
As COVID spread across the world this spring, the G20 group of leading nations hammered out an agreement to allow 73 of the world\u2019s poorest countries to postpone this year\u2019s official bilateral debt repayments for three years. But larger options faltered as both China and the US proved reluctant to engage in wider collective action.<\/p>\n
So far 43 countries have applied for debt suspensions through the initiative, delaying about $5.3bn of payments this year \u2014 less than half of the $11.5bn available, according to the World Bank.<\/p>\n
Critics say the debt service suspension has been hobbled by confusion and disagreement over which lenders should take part and on what terms. Private sector creditors, including commercial banks and bondholders, are not involved and have continued to receive repayments. China, which has emerged as a significant source of lending to poor countries in recent years, has contributed only partially.<\/p>\n
Only three of the 43 countries involved have asked private creditors for comparable debt relief and no agreements have yet been reached according to the IMF.<\/p>\n
The G20 is expected to announce an extension of the repayment moratorium as early as this week. But finance ministers in nations in need of debt relief told the Financial Times that much more should be done.<\/p>\n
\u201cThe ability of central banks in the west to respond [to the pandemic] to an unimaginable extent and the limits of our ability to respond are quite jarring,\u201d said Ken Ofori-Atta, finance minister of Ghana.<\/p>\n
Ghana has been vocal in criticizing western nations for allegedly neglecting the mounting crisis in Africa while finding trillions of dollars to stimulate their own economies.<\/p>\n
Adama Coulibaly, minister of economy and finance for Ivory Coast, said: \u201cWe hope that the [debt service suspension] will be extended for another year so that the initiative can produce real impact.\u201d<\/p>\n
But Ukur Yatani, Kenya\u2019s finance minister, told the FT that his country would stay away from the initiative. \u201cPushing our repayments out by three years without giving us a break would put a heavy load on us. We have some heavy repayments around that time,\u201d he said.<\/p>\n
Instead Yatani said his hopes were on an IMF program which Kenya has begun to negotiate.<\/p>\n
Richard Kozul-Wright, director of development strategies at the United Nations Conference on Trade and Development, said \u201canything that provides resources that can be used to address the pandemic in the most vulnerable countries has to be welcomed\u201d. But, he warned, \u201cin the wider picture, given the financial constraints those countries face, [the debt service suspension] just seems like a drop in the ocean\u201d.<\/p>\n
Vera Songwe, head of the UN Economic Commission for Africa, is coordinating an appeal by African finance ministers for $100 billion a year for the next three years to support stricken economies on the continent.<\/p>\n
This is a fraction of the fiscal and monetary stimulus already delivered in the US and Europe when compared to Africa\u2019s combined annual economic output of about $2.6 trillion, she said.<\/p>\n
Although Songwe wants the initiative to be expanded to benefit more countries, she said that a loan guarantee facility to reduce poor countries\u2019 borrowing costs \u2014 which are already prohibitively expensive for many with low credit ratings \u2014 would be more powerful.<\/p>\n
The \u201cideal private sector contribution to this crisis\u201d would be for investors to agree \u201cto make less income so that countries can access the resources they need more cheaply\u201d, she said.<\/p>\n
The question is how to fund such a facility. The IMF could launch more of its so-called special drawing rights (SDRs) \u2014 a form of proxy reserve asset \u2014 but that possibility has been vetoed by the US.<\/p>\n
Songwe has appealed to G20 central banks to back the idea.<\/p>\n
Ghana supports the idea of using SDRs to help cushion emerging economies\u2019 finances and has been frustrated at what it sees as US opposition to the proposal.<\/p>\n
\u201cNot only should we create new SDRs to help us, but a good number of western countries don\u2019t use them which means they could be transferred to us to avert our liquidity issues descending into insolvency issues,\u201d Ofori-Atta said.<\/p>\n
Unless this week\u2019s lobbying produces fresh momentum, however, the finance ministers of many developing economies will be left contemplating how to cope in the months to come, as the COVID costs mount.<\/p>\n
\u201cIt is unthinkable tha<\/p>\n","protected":false},"excerpt":{"rendered":"
Government ministers of poor and indebted nations will this week appeal to their creditors for a much more ambitious debt relief effort as they grapple with the health care and economic consequences of the coronavirus pandemic. They will set out their case for greater support from foreign governments and multilateral lenders as delegates gather for […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[2,8],"tags":[118,797,1093,1069,966,28,159,639,178,84,95,68,22,23,638],"yoast_head":"\n