Updated: February 25, 2021
The International Monetary Fund (IMF) has given more details on the debt service relief approved for 25 low-income countries, including 19 in Sub-Saharan Africa. The initial relief provided to these countries amounts to $213.4 million. It would cover a period of six months and could be extended to two years.
Debt service is the cash that is required to cover the repayment of interest and principal on a debt for a particular period.
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What does this mean?
This does not mean the debt owed by these 19 African countries and 6 others from around the world has been canceled. It simply means that their debt is still their original debt minus $213.4 million that they could have been paying for the next six months. The move is to free up funds for these countries to respond to the novel coronavirus pandemic.
Ms. Kristalina Georgieva, Managing Director of the IMF had on Monday announced that the Fund had approved immediate debt service relief to 25 of the IMF’s member countries under the IMF’s revamped Catastrophe Containment and Relief Trust (CCRT). Nineteen of those countries are in Sub-Saharan Africa.
The 19 African countries that will receive debt service relief are Benin, Burkina Faso, Central African Republic, Chad, Comoros, Democratic Republic of the Congo, The Gambia, Guinea, Guinea-Bissau, Liberia, Madagascar, Malawi, Mali, Mozambique, Niger, Rwanda, São Tomé and Príncipe, Sierra Leone and Togo.
Other countries are Afghanistan, Yemen, Tajikistan and Nepal in Asia as well as Haiti in North America and Solomon Islands in Oceania.
Oceania is a geographic region that includes Australasia, Melanesia, Micronesia and Polynesia. Spanning the eastern and western hemispheres, Oceania has a land area of 8,525,989 square kilometers and a population of over 47 million.
On Wednesday, the IMF gave more details on the debt service relief for 25 member countries that are eligible for support from the Catastrophe Containment and Relief Trust (CCRT). It said a further four countries are expected to request such relief in the coming weeks.
IMF said the approval of debt relief for the 25 countries enables the disbursement of grants from the CCRT for repayment of “total debt service” falling due to the IMF over the next six months, with potential extensions, up to a maximum of full two years from April 14, 2020, subject to availability of sufficient grant resources.
“The initial relief provided to these countries amounts to $213.4 million. Relief on debt service will free up scarce financial resources that now can be directed toward vital emergency medical and other relief efforts while these members combat the impact of the pandemic,” IMF said in a statement on Wednesday.
It said the Managing Director has launched “an urgent fundraising effort that would enable the CCRT to provide relief on debt service for a full two years, while leaving the CCRT adequately funded for future needs.”
“This will require a commitment of about $1.4 billion. Donors have already stepped up with pledges and contributions including a $185 million pledge by the United Kingdom and $100 million provided by Japan as immediately available resources. Other donors, including the People’s Republic of China and the Netherlands, are also stepping forward with important contributions.”
On March 26, the Executive Board of the International Monetary Fund (IMF) adopted a set of reforms to its Catastrophe Containment and Relief Trust (CCRT) to enable the Fund to provide immediate debt service relief for its poorest and most vulnerable members during the current COVID-19 pandemic.
The CCRT enables the IMF to deliver grants to eligible low-income countries to cover their IMF debt service obligations in the wake of catastrophic natural disasters and during major global public health emergencies.
Eligibility for CCRT support is limited to IMF member countries with annual per capita GNI below the World Bank’s operational cut-off (or twice the cut-off for small states), generally the poorest and most vulnerable member countries.
Executive Directors determined, effective April 14, 2020, that the COVID‑19 pandemic was now a Qualifying Public Health Disaster under the Catastrophe Containment and Relief Trust (CCRT) that is inflicting severe economic disruption across the Fund’s membership.