China and G-20
countries have agreed to give debt relief to the poorest countries in the world
which are classified as IDA countries by the World Bank.
This is according to
comments made by David Malpass, the World Bank president, on Friday at the
ongoing virtual April 2020 virtual Spring meetings of the World Bank and
International Monetary Fund.
“IDA countries will
have bilateral debt relief beginning May 1. That way, they can concentrate
their resources on fighting the pandemic and its economic and social
consequences,” he said.
“I take note that in
the G-20 meetings, China is supporting the international agreement to allowing
moratorium of debt repayments by IDA countries if they ask for forbearance.
“That’s very
important because China is one of the biggest creditors and their participation
in that effort is important and was very welcome.”
Countries under the
International Development Association (IDA) are those with per capita income
below an established threshold. The 2020 threshold is $1,175.
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.
Malpass said a
system will be set up to monitor how developing countries utilise the funds
made available by the debt relief.
“So if the
government saves money by not paying creditors, there is an expectation that
they use it for health, education, economic rebuilding, jobs and concrete ways
to help the people of their country,” he said.
“There is also
within the debt relief initiative, the idea that there will be monitoring and
assessment of the debt sustainability of poor countries.
“That process itself
will amount to transparency. That’s going to change the way that countries have
been lending into the developing world and it will improve it substantially and
there will be a big benefit even to the creditors.
“It’s not the best
system for creditors to be making non-transparent loans into poor countries and
this is going to improve the system.”
He also said the
process will also ensure that developing countries get more grants and
concessional loans.
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