With the aim of helping the poorest countries fight against the spread of COVID-19, the International Monetary Fund (IMF) approved relief on debt service for 25 member countries including 19 in Africa.
From African countries Benin, Burkina Faso, Central African Republic, Chad, Comoros, Congo, The Gambia, Guinea, Guinea-Bissau, Liberia, Madagascar, Malawi, Mali, Mozambique, Niger, Rwanda, São Tomé and Príncipe, Sierra Leone and Togo will benefit from the debt service relief. Out of Africa, Afghanistan, Haiti, Nepal, Solomon Islands, Tajikistan and Yemen are included in the debt service relief program of the IMF. The IMF selected the beneficiary countries selected because they are eligible for support from the Catastrophe Containment and Relief Trust (CCRT). A further 4 countries are expected to request such relief in the coming weeks, according to the statement of the IMF.
“The approval enables the disbursement of grants from the CCRT for repaymet of total debt service falling due to the IMF over the next six months, with potential extensions, up to a maximum of full two years from April 14, 2020, subject to availability of sufficient grant resources,” it said.
The initial relief provided to these countries amounts to SDR 157.1 million ($213.4 million). Relief on debt service will free up scarce financial resources that now can be directed toward vital emergency medical and other relief efforts while these members combat the impact of the pandemic. The Managing Director has launched an urgent fundraising effort that would enable the CCRT to provide relief on debt service for a full two years, while leaving the CCRT adequately funded for future needs.
“This will require a commitment of about $1.4 billion. Donors have already stepped up with pledges and contributions including a $185 million pledge by the United Kingdom and $100 million provided by Japan as immediately available resources. Other donors, including the People’s Republic of China and the Netherlands, are also stepping forward with important contributions,” IMF said.
On March 26, the Executive Board of the IMF adopted a set of reforms to its Catastrophe Containment and Relief Trust (CCRT) to enable the Fund to provide immediate debt service relief for its poorest and most vulnerable members during the current COVID-19 pandemic. The CCRT enables the IMF to deliver grants to eligible low-income countries to cover their IMF debt service obligations in the wake of catastrophic natural disasters and during major global public health emergencies.
Eligibility for CCRT support is limited to IMF member countries with annual per capita GNI below the World Bank’s operational cut-off (or twice the cut-off for small states), generally the poorest and most vulnerable member countries. Below is the full assessment of the Executive Board of the IMF-
Executive Board Assessment
“Executive Directors determined, effective April 14, 2020, that the COVID‑19 pandemic is a Qualifying Public Health Disaster under the Catastrophe Containment and Relief Trust (CCRT) that is inflicting severe economic disruption across the Fund’s membership. The crisis is creating balance of payments needs on scale that warrant concerted international efforts to support the poorest and most vulnerable countries through substantial additional grant support for debt service relief. Directors also approved the technical modifications to the CCRT Instrument, which would facilitate operational implementation of the provision of assistance for debt relief under the Catastrophe Containment (CC) window.
Directors agreed that the CCRT has sufficient financial resources to deliver a first tranche of grants for debt service relief to all 29 countries with outstanding credit to the Fund that are potentially eligible for CCRT assistance over the next six months. They agreed that 25 of these countries that have requested such assistance meet the specific criteria for qualification for debt service relief, and looked forward to considering the requests for assistance of the remaining four eligible members.
Directors would consider committing additional tranches, up to a cap of two years through April 13, 2022, in light of the availability of CCRT resources at the end of each tranche period. To this end, Directors stressed the urgency of the ongoing fundraising effort to ensure timely delivery of assistance to the eligible countries.
Directors underscored the importance of monitoring the macroeconomic situations of the recipient countries, including their policy responses to pandemic, and looked forward to an update from staff toward the end of the initial six‑month period of debt service relief. In this context, a number of Directors highlighted the need for careful analysis of debt sustainability, safeguards, and accountability, and called for staff assessment on the effectiveness of country policies and use of debt service relief resources prior to the commitment of future tranches.”