The World Bank Group and International Monetary Fund have urged all bilateral creditors to suspend debt payment from Nigeria and 75 other International Development Association (IDA) countries that request forbearance.
The IMF noted that the continued spread of the coronavirus pandemic in sub-Saharan Africa would adversely affect the region’s economic growth, with direct disruptions to people’s livelihoods, tighter financial conditions, reduced trade and investment as well as substantial decline in commodity prices.
The Breton Woods institutions, which listed Nigeria as one of the IDA countries qualified to benefit from the debt relief for the poorest countries; in a joint statement issued in Washington DC to the G20 stated that “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 two institutions promised.
They expressed believe that it had become 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”.
In a blog posting on the IMF’s website, top officials in the Fund’s Africa Department said they had received requests for emergency financing from over 20 nations in the region and expect at least 10 more soon.
The IMF Managing Director, Kristalina Georgieva confirmed that some 80 countries had requested loans from emergency facilities, under which some $50 billion is available, with at least 20 more requests expected.
The Director of the IMF Africa Department, Abebe Aemro Selassie, and Karen Ongley, mission chief for Sierra Leone, wrote in the blog posting that: “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.
“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. 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”, they stressed.
This is even as they pointed out that 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”, the duo added.
Even then, Selassie and Ongley 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 cash flow shortfalls for affected businesses,” they canvassed.
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”.