IMF and World Bank Announce Unprecedented Debt Cancellation Programme to Address COVID-19 Pandemic
On the eve of the Spring Meetings of the International Monetary Fund (IMF) and World Bank, amid the unprecedented Coronavirus pandemic, the IMF, in partnership with the G20 and World Bank has released an aggressive plan to immediately address this unprecedented global crisis by canceling all debts they are owed by any country that faced a moderate or high risk of debt distress before the coronavirus crisis.
In a statement released today, the Executive Board of the Fund said that it feels “compelled” to use the Fund’s influence in this moment to ensure that vulnerable countries are free to direct all public revenues at their disposal to stop the spread of this disease and mitigate the financial crisis.
“As the world's leading finance institution,” the statement continues, “it is vital that we step in to guide the invisible hand of the global market in the right direction.” The Fund acknowledged previous policies that impacted the basic needs of billions of the world’s poor to the dictates of financial institutions’ austerity policies and that the unprecedented nature of the global pandemic demands a shift of The Fund’s policy priorities to stem massive economic repercussions.
“We are humbled by this economic crisis and the role that we have played in precipitating such a scenario. For years, the entire international financial system, created from our Bretton Woods charter, has set countries up for the adoption of free market ideals. By providing loans across the globe, we have helped countries spread their goods and in turn strengthen the bonds and livelihoods of everyday people,” according to the statement. “However, with more and more countries facing the challenge of a global pandemic, we’ve decided to throw our massive weight into this delicate job.”
We are moving forward with a new process that will immediately cancel the debt of the 27 countries facing debt distress. Additionally, all 76 of the World Bank's International Development Association (IDA) countries will receive full debt cancellation. All developing countries categorized either as Middle Income Countries or Low Income Countries who face high debt vulnerabilities will see a full cancellation of debt. In total, this new process will apply to 111 countries. These countries will receive full cancellation of all debts as they wrestle with the COVID-19 Pandemic.
The Board noted that this relief should help mitigate disruptions to the supply chains of essential commodities for consumption in the developed world such as coffee and chocolate. Prevention of supply chain disruption is essential for timely delivery of medical supplies including scarce Personal Protection Equipment and medicines critical for developed countries as they fight the pandemic.
Given the huge drop in commodity prices as a result of the crisis, countries that are economically dependent on fossil fuel revenues are experiencing the worst consequences as their economies crumble. For years, the Fund and other international financial institutions have advocated for extraction-based development regimes and policies that provide mechanisms for developing governments to turn their subsoil wealth into cash with the help of Western oil companies. The Fund acknowledged this history, noting that in developing countries around the world, the myth of fossil fuel-reliant “wealth” generation has become all too apparent.
Dozens of international development organizations have expressed enthusiastic support for the Fund’s plan, while requesting that the Fund and other international financial lenders take reparative action for the historic social and economic consequences of burdensome debt levels. The Fund is announcing formal agreement with this position and is convening an international coalition to address this urgent matter.