A few days ago, the International Monetary Fund (IMF) announced that it has awarded grants to poor countries to enable them to temporarily service their debts at the IMF. Today, the G20 announced that they will be suspending debt repayment temporarily for poor countries owing them.
The reason for both the grants given by IMF and the suspension of debt repayment by G20 is that these would leave these poor countries with more money in their pockets to fight covid-19. That is to say that they can now channel the money they would have used to service debts to fighting covid-19.
While these may seem like huge help at this time, questions still remain as to how and when these countries can eventually get out of these debts considered by many as obstacles to rapid economic growth.
Many have called on the IMF, World Bank, G20 and other lenders to consider cancelling these debts entirely if they truly want these countries to grow. How can a poor country be spending more money servicing debts than it is spending on healthcare? How can a country be spending more money servicing debts than it is investing in education?
Covid-19 pandemic has provided the world another opportunity to review the terms and conditions of these loans to ensure that these poor countries are not being made poorer through these loans. There is no doubt that these poor countries are going to be facing severe economic challenges after covid-19 at which time they will be expected to start servicing their loans again.
This situation would leave them with no option than to go back to their lenders to borrow more. In the end, the amount of money they will be spending in servicing debts will increase because they have borrowed more. This will wipe off any gains they made during the period of repayment suspension and should they be required to repay the suspended payments after covid-19, then these countries will be in real trouble.
I think that a modest sense of solidarity dictates that if there is anytime debt forgiveness may be most needed by these countries, it is now. The world must put pressure on IMF, G20, Paris Club and other lenders to consider forgiving these debts, after all, they have probably made enough profits from service fees and interests.
Godswill Agbagwa
Founder, www.csaaeinc.org
Member, World Bank-IMF Civil Society Policy Forum Working Group (2017-2020)
