New debt relief push for world’s poor countries

MANAMA: Following directives from His Majesty King Hamad, Finance and National Economy Minister Shaikh Salman bin Khalifa Al Khalifa yesterday took part in a high-level event on ‘Financing for Development in the Era of Covid-19 and Beyond’.

Heads of states and governments took part in the virtual meeting, convened by the United Nations.

The meeting discussed latest developments of the pandemic and its impacts on the global economy.

Plans for debt relief for world’s poorest countries inched forward yesterday as private creditors laid out a blueprint for their involvement, though it received immediate criticism for not going far enough.

The proposal shepherded by the Institute of International Finance (IIF) said creditors would grant debt breaks on a case-by-case and voluntary basis this year after concluding a one-size-fits-all approach would have been “practically impossible.”

It was the culmination of work involving more than 100 top money managers after the G20 economies had called on the private sector to match their recent Debt Service Suspension Initiative to help some 77 low-income countries.

“The IIF has been adamant that creditors of every type and size have a role to play in making sure the world’s most vulnerable countries have the liquidity needed to combat the Covid-19 pandemic,” said IIF president and chief executive Tim Adams.



UN chief Antonio Guterres yesterday called for debt relief to be expanded and offered to all developing and middle-income countries and urged the International Monetary Fund to increase allocations of its special drawing rights currency to give countries more access to funding.

“Alleviating crushing debt cannot be limited to the least developed countries,” Guterres told the high-level UN meeting.

“It must be extended to all developing and middle-income countries that request forbearance as they lose access to financial markets.”

UN officials say debt relief is imperative to enable developing economies to spend more on stopping the spread of the coronavirus and limit what economists worry is an inevitable debt crisis.

The IMF said it estimates that emerging market economies have raised some $77 billion in debt in April and May, partially reversing massive capital outflows of $100bn seen after the coronavirus outbreak.

IMF managing director Kristalina Georgieva told the UN conference the Fund had provided $22bn in emergency financing to 60 of the 103 countries that had asked for help, while offering grants to cover IMF debt service payments for 27 of its poorest members for six months.

African Union special envoy Tidjane Thiam told the conference the G20 debt relief initiative for the poorest countries through the end of the year was a good start, but a longer debt standstill of two years was needed.

German Chancellor Angela Merkel urged fellow leaders to consider providing further support to multilateral institutions like the United Nations and the World Health Organisation to speed recovery from the coronavirus crisis.

Speaking at the UN-sponsored video conference of world leaders, she also said countries should allocate more funding to the IMF to help states that come into short-term financial difficulties.

“Additional IMF measures might also be considered when it becomes necessary to, at short notice, secure the liquidity of vulnerable states,” she said through an interpreter.




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