The World Bank Group and International Monetary Fund have urged all official bilateral creditors to suspend debt payment from IDA countries that request forbearance. IMF also said that the spread of the coronavirus into sub-Saharan Africa will hit the region’s economic growth hard, with direct disruptions to people’s livelihoods, tighter financial conditions, reduced trade and investment and a steep drop in commodity prices. Nigeria is listed as one of the countries qualified to benefit as one of the International Development Association countries. In a joint statement issued in Washington DC, the two multilateral institution said the following joint statement to the G20 concerning debt relief for the poorest countries; “the coronavirus outbreak is likely to have severe economic and social consequences for International Development Association, IDA countries, home to a quarter of the world’s population and two-thirds of the world’s population living in extreme poverty.
“With immediate effect—and consistent with national laws of the creditor countries—the World Bank Group and the International Monetary Fund call on all official bilateral creditors to suspend debt payments from IDA countries that request forbearance. 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.
“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). 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. The international community would welcome G20 support for this Call to Action”.
According to the World Bank Group, “eligibility for IDA support depends first and foremost on a country’s relative poverty, defined as GNI per capita below an established threshold of $1,175 in fiscal year 2020. IDA also supports some countries, including several small island economies, that are above the operational cutoff but lack the creditworthiness needed to borrow from the International Bank for Reconstruction and Development IBRD. “Some countries, such as Nigeria and Pakistan, are IDA-eligible based on per capita income levels and are also creditworthy for some IBRD borrowing. They are referred to as “blend” countries. 76 countries are currently eligible to receive IDA resources”.
The IMF said that the spread of the coronavirus into sub-Saharan Africa will hit the region’s economic growth hard, with direct disruptions to people’s livelihoods, tighter financial conditions, reduced trade and investment and a steep drop in commodity prices. In a blog posting on the IMF’s website, top officials in the Fund’s Africa Department said they have received requests for emergency financing from over 20 nations in the region and expect at least 10 more soon.
As reported by Businessnewsreport yesterday the Fund announced that Ghana had requested a rapid-disbursing emergency loan to fight the coronavirus pandemic. IMF Managing Director Kristalina Georgieva said some 80 countries had requested loans from emergency facilities, under which some $50 billion is available, with at least 20 more requests expected.
“Across the region, growth will be hit hard. Precisely how hard is still difficult to say. But it is clear that our growth forecast in April’s regional outlook will be significantly lower,” Abebe Aemro Selassie, director of the IMF Africa Department, and Karen Ongley, mission chief for Sierra Leone, wrote in the blog posting. During the global financial crisis more than a decade ago, African countries were spared the brunt of the economic impact, because many were less integrated with global financial markets and supply chains, Selassie and Ongley wrote. Debt levels were lower too and countries had more room to increase spending to boost growth. In the coronavirus pandemic, a number of countries have closed borders and limited public gatherings, which will cut many off from paid work.
“For society’s most vulnerable in the region, ‘social distancing’ is not realistic. The notion of working from home is only possible for the few,” Selassie and Ongley wrote. The disruptions to livelihoods will mean less income, less spending, and fewer jobs. Closed borders mean that travel and tourism will dry up, along with trade and shipping. The partial shutdown of major economies means that global demand will fall, further disrupting supply chains and trade. And tighter global financial conditions will limit access to finance and delay investments and development projects, they wrote With oil prices down 50% since the start of 2020, the impact on oil exporters in Africa will be substantial. “We estimate that each 10% decline in oil prices will, on average, lower growth in oil exporters by 0.6% and increase overall fiscal deficits by 0.8% of GDP,” they wrote.
Nonetheless, they recommended increased fiscal spending – first on public health, but also to provide broad economic support, including cash transfers to individuals and households under strain. “Where feasible, governments should consider targeted and temporary support for hard-hit sectors such as tourism. For instance, temporary tax relief through targeted reductions or delays in paying taxes could help address cashflow shortfalls for affected businesses,” they said.