The World Bank and the International Monetary Fund (IMF) have written to bilateral creditors requesting debt relief for the poorest countries in the world in the wake of the coronavirus pandemic.
The two financial institutions have called on the G20, an international forum for the governments and central bank governors from nineteen countries and the European Union, to suspend debt payments from International Development Association (IDA) countries that request forbearance.
According to the statement from the two financial institutions, the coronavirus outbreak may have serious economic and social ramifications for IDA countries. IDA is one of the largest sources of assistance for the world’s 76 poorest countries with eligibility for support depending on GNI per capita below an established threshold ($1,175 in the fiscal year 2020).
Kenya is one of the IDA countries eligible to receive IDA resources thus may be relieved from debt repayment should it request forbearance. The IMF and World Bank argue that delaying debt repayments will help with immediate liquidity needs to tackle the COVID19 impact and assess the financing needs in these countries.
Somalia is another nation that will benefit from the aid of the two financial institutions. According to the two institutions, Somalia has taken the necessary steps to begin receiving debt relief, a key move that will allow the Horn of Africa country to lower its external debt, which currently sits at Ksh.520 billion, to around Ksh.55.7 billion.
The decision will immediately normalize Somalia’s relations with the world after 30 years outside the international financial system.
“Debt relief will help Somalia make lasting change for its people by allowing its debt to be irrevocably reduced from Ksh520 billion at end-2018 to Ksh55.7 billion in net present value terms (NPV) once it reaches the HIPC Completion Point in about three years’ time,” the bank and the fund said.
IMF Managing Director Kristalina Georgieva similarly congratulated Somalia for the intense efforts that had laid the foundation for inclusive economic growth, underscoring the need for Somali authorities to stick to their reforms.
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