The World Bank Group (WBG) and the International Monetary Fund (IMF) call on all official bilateral creditors to suspend debt payments from International Development Association (IDA) countries that request forbearance or restraint.
In a joint statement dated 25 March the World Bank Group and the International Monetary Fund say 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.
They note that the coronavirus outbreak is likely to have severe economic and social consequences for IDA countries, which is home to a quarter of the world’s population and two-thirds of the world’s population living in extreme poverty. Liberia is a member of IDA countries.
According to research, the International Development Association (IDA) is the part of the World Bank that helps the world’s poorest countries. Overseen by 173 shareholder nations, IDA aims to reduce poverty by providing loans (called “credits”) and grants for programs that boost economic growth, reduce inequalities, and improve people’s living conditions.
Eligibility for IDA support depends first and foremost on a country’s relative poverty, defined as GNI per capita below an established threshold and updated annually ($1,175 in fiscal year 2020).
“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 IDA countries. We will seek endorsement for the proposal at the Development Committee during the Spring Meetings (April 16/17)”, says the statement.
IDA is one of the largest sources of assistance for the world’s 76 poorest countries and is the single largest source of donor funds for basic social services in these countries.
IDA lends money on concessional terms. This means that IDA credits have a zero or very low interest charge and repayments are stretched over 30 to 38 years, including a 5- to 10-year grace period. IDA also provides grants to countries at risk of debt distress.
In addition to concessional loans and grants, IDA provides significant levels of debt relief through the Heavily Indebted Poor Countries (HIPC) Initiative and the Multilateral Debt Relief Initiative (MDRI).
In the fiscal year ending June 30, 2019, IDA commitments totaled $22 billion, of which 36 percent was provided on grant terms. New commitments in FY19 comprised 254 new operations. Since 1960, IDA has provided $391 billion for investments in 113 countries. Annual commitments have increased steadily and averaged about $22 billion over the last three years.
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, adding, the international community would welcome G20 support for this Call to Action. Statement