World’s poorest countries fighting COVID-19 with both hands tied behind their backs
New analysis from the ONE Campaign warns that the world’s poorest countries could be denied $51 billion to help fight COVID-19 if international creditors refuse to offer a temporary debt service standstill during next week’s G20 and IMF/World Bank Annual Meetings.
The anti-poverty organisation highlights that the world’s poorest countries are dealing with a two-pronged financial crisis, all in the middle of the pandemic. In addition to being denied rapid and essential liquidity by having debt service payments paused, they are also projected to lose $120 billion in economic output in 2020 alone.
ONE is calling on the G20 to extend its Debt Service Suspension Initiative (DSSI) to the end of 2021 and urges multilateral institutions and private creditors to do the same. It is also calling on the IMF to allocate 500 billion of Special Drawing Rights (SDRs) to help low and middle-income countries to respond to the pandemic.
Gayle Smith, CEO and President of the ONE Campaign, said: “It is unthinkable that in a global pandemic, the world’s poorest countries are having to choose between making debt service payments and keeping their economies afloat.
“For every month that the poorest countries repay wealthy creditors, they could buy 100 million COVID-19 tests. Money saved from debt service standstill could also enable governments to provide vaccines for the most vulnerable people and help put an end to this global pandemic.
“A complete debt service standstill backed by all creditors, coupled with a new allocation of SDRs, is the fastest and smartest way to inject the capital needed to stabilise economies and respond to the pandemic.”
While some steps have been taken by international creditors to support the world’s poorest countries, progress remains slow. The cost of inaction on debt service standstill next week will exacerbate the human and economic toll of the crisis.
Smith continued: “The World Bank, for example, has taken urgent and important steps to increase and expedite IDA flows and create a new fund for vaccines, but poor countries also need the liquidity that a debt service standstill can provide.
“Even more disturbing is the fact that private creditors are refusing to budge. Failure to participate and thus help prevent defaults, insolvency and economic hardship for millions is morally indefensible and economically short-sighted.
“The G20 can’t just ‘urge’ them to act in a communique; it must use its clout as the official steward of the global economy to apply some serious pressure.”
“Failure to suspend debt service for the world’s poorest countries risks reversing years of progress in reducing global poverty. A prolonged pandemic means millions more going to bed hungry, job losses, a wave of defaults, potential migration, and instability.