African nations are almost plunging into financial crisis as they have been forced to take drastic measures by investing a huge chunk of their resources into combating COVID-19. These nations still have huge debts from developed countries that they have to service even in this pandemic.
Luckily, the International Monetary Fund and World Bank on Wednesday called for governments to put a hold on debt payments from the world’s poorest nations so they can battle the coronavirus pandemic. The move aims to help countries that are home to two-thirds of the world’s population living in extreme poverty, in sub-Saharan Africa and qualify for the most generous, low-cost loans from the International Development Association (IDA) financed by wealthier nations.
“The World Bank Group and the IMF believe it is imperative at this moment to provide a global sense of relief for developing countries as well as a strong signal to financial markets,” read a joint statement. The coronavirus outbreak is likely to have severe economic and social consequences for IDA countries which will face immediate liquidity needs to tackle challenges posed by the coronavirus outbreak,” read a joint statement.
IDA is one of the largest sources of assistance for the world’s 76 poorest countries, providing zero or low-interest loans spread over 30 years or more, and grants to some distressed nations. According to World Bank, in the financial year ending June 30, 2019, IDA commitments totalled $22 billion, of which 36 per cent was provided on grant terms.
World Bank and IMF called for a thorough analysis of the financing need these countries will face after this COVID-19 crisis and whether their total debt load is sustainable.