A global campaign movement is pushing for the debt relief for Africa nations and other poor nations due to the COVID 19 pandemic be extended to cover all of 2021.
The movement called ONE says debt relief is one of the fastest, most effective means of freeing up cash in developing country budgets.
It says that the recent G20 agreement to suspend debt repayments for the poorest countries for the rest of 2020 will free up some badly needed cash. But it is not enough.
In their campaign dubbed Ask G20 to suspend debt to fight coronavirus, ONE says: “The current deal only covers bilateral debt (loans from other governments), which makes up about half of total debt service for these countries. Debt to multilateral institutions and private debt, owed to bondholders and commercial banks, make up another US$24 billion.”
“Freeing up the rest of the debt service is crucial to give the most flexibility to governments, and to ensure that money saved from bilateral debt relief isn’t being used to finance debt payments to multilateral or private creditors.
No country should be faced with the impossible choice of saving lives or making debt repayments during this pandemic,” ONE says.
ONE stated that the current G20 agreement covers only the remaining eight months of 2020, but it is clear things will not go back to normal that soon.
On April 15, G20 Finance Ministers and Central Bank Governors agreed to suspend debt repayments for the world’s poorest countries for the remainder of 2020 as part of its COVID-19 action plan. This included supporting a time-bound suspension on government debt and calling on private creditors and multilateral development banks to follow suit.
In welcoming the move, Gayle Smith, President and CEO of The ONE Campaign, said: “The G20’s decision to suspend debt repayments for the world’s most vulnerable countries is a vital first step in this ongoing crisis, and will enable those countries to prioritise fighting COVID-19 and to withstand the first wave economic impact of this global pandemic.
“We won’t beat this virus until we beat it everywhere. And we won’t limit the economic impact of this pandemic unless we secure a truly global recovery that leaves no one behind.
“It is now critical that the world builds on this important first step, and we now look to private creditors, the IMF and World Bank to do their part.”
But now ONE says the relief needs to be extended to cover all of 2021 to give greater security and ability to plan for use of the funds.
“For the 73 countries covered by the current G20 deal, this means an additional US$22 billion available for the crisis in bilateral debt suspension for 2021.”
“The crisis will also affect all countries regardless of their income level. No country in the world had planned for this type of shock.
“So solidarity should extend to all countries in Africa that may be struggling, as called for by African leaders. Extending a bilateral debt suspension to include all of Africa would free up an additional US$7.6 billion in 2020 and at least US$6 billion in 2021.”
Edwin Ikhouria, Africa Executive Director of The ONE Campaign, said: “As Africa faces the danger of slipping into a new debt crisis, we strongly urge the G20 to not only extend the debt suspension agreement to the poorest countries but also every country in Africa through 2021. Many that are not included – South Africa, Egypt and others – face tremendous economic pressure as they fight the virus.”
“Ultimately, the debt repayment suspension is a short-term solution, as many of these countries will struggle to meet spiralling debt costs. We will also need a longer-term plan to restructure the debt,” he added.
The G20 has also called on multilateral lenders to provide comparable debt relief. Total multilateral debt for the G20 debt relief-eligible countries totalled US$12 billion for 2020, about one-third of which is owed to the World Bank.
At least US$13 billion is due to multilateral in 2021. And expanding this to cover all African countries would add approximately US$6.5 billion in 2020 and US$5.8 billion in 2021 to the previous totals.
So far, only the IMF has approved debt cancellation for six months for the 25 poorest countries through its Catastrophe Containment and Relief Trust (CCRT) Fund, worth approximately US$214 million, but the World Bank does not have a comparable debt relief fund.
Multilaterals are reluctant to participate in a debt standstill due to concerns about their cash flow and credit ratings. In the short term, the World Bank is concerned that without money coming in from debt repayments, it would be unable to frontload new loans and grants.
In the long term, the Bank is concerned about how a suspension might affect its credit rating, and thus its ability to borrow money from markets at the lowest available rates, and re-lend that money to developing countries.
ONE is a global movement campaigning to end extreme poverty and preventable disease by 2030, so that everyone, everywhere can lead a life of dignity and opportunity.
Whether lobbying political leaders in world capitals or running cutting-edge grassroots campaigns, ONE pressures governments to do more to fight extreme poverty and preventable disease, particularly in Africa, and empowers citizens to hold their governments to account.
Part of ONE’s successes include helping secure at least $37.5 billion in funding for historic health initiatives, including the Global Fund to Fight AIDS, TB and Malaria, and Gavi, the Vaccine Alliance, helping secure legislation in the US, Canada and EU on transparency in the extractives sector to help fight corruption and ensure more money from oil and gas revenues in Africa is used to fight poverty, successfully advocating for official development assistance, which has increased globally by $35.7 billion between 2005 and 2014 and helping to get new US legislation passed on energy poverty:; the Electrify Africa Act 2016.
BY ODINDO AYIEKO