The International Monetary Fund (IMF) and the World Bank Group (WBG) have been asked by the Development Committee to continue to review the debt challenges of low-income countries and propose actions to address their fiscal and debt stress on a case-by-case basis. The Joint Ministerial Committee of the Boards of Governors of the Bank and the Fund on the transfer of real resources to developing countries made this request in their Communique issued at the end of their meeting at the 2020 Annual General Meetings.
“We also continue to encourage the WBG and IMF to review the debt challenges of middle-income countries and to explore customized solutions to their fiscal and debt stress on a case-by-case basis, including by providing additional resources in these challenging times, in line with the capital package commitments.” The Committee commended the WBG for its exceptional delivery in the final quarter of fiscal year 2020, with US$45 billion in commitments consisting of US$32 billion from IBRD/IDA, US$11 billion from IFC, and US$2 billion from MIGA, including via their fast-track facilities, for operations in more than 100 countries.
They also appreciated the second phase of IFC’s response, which will include the restructuring and recapitalizing of viable companies and financial institutions as well as support to health care value chains in emerging and developing economies. The planned scaling up to US$35 billion of IDA-19 resources in fiscal year 2021 it says could help countries address their long-term development needs. The WBG it says should continue its efforts to deliver a bold and decisive response of up to US$160 billion by June 2021.
Considering the severity and likely long-term effects of the crisis, they encourage discussions on the WBG financial capacity beyond fiscal year 2021, to ensure that the WBG remains adequately capitalized to fulfill its mandate.
In addition, they commended the IMF for its rapid and effective crisis response, which has provided some US$100 billion in assistance to over 80 countries during the pandemic, primarily through emergency financing facilities. “We call on the IMF to continue to deploy all available tools and resources to help members achieve a durable exit from the crisis while building more resilient and inclusive economies.” They support the extension of the Debt Service Suspension Initiative (DSSI) by six months and to examine, by the time of the 2021 WBG and IMF Spring Meetings, if the economic and financial situation requires to extend further the DSSI by another six months, with targeted complements to the April 2020 DSSI Term Sheet.
“All official bilateral creditors should implement this initiative fully and in a transparent manner. We strongly encourage private creditors to participate on comparable terms when requested by eligible countries” the Communique reads.
The Committee asked further that the WBG and IMF should continue supporting DSSI implementation, including by providing further details on the net new resources they are providing to each eligible country.
The IMF and WBG they say should strengthen quality and consistency of debt data and improve debt disclosure during their work. “Amid high public debt levels, shrinking economies, and rising fiscal pressures, we recognize that debt treatments beyond the DSSI may be required on a case-by-case basis. In this context, we welcome the G20’s agreement in principle on a “Common Framework for Debt Treatments beyond the DSSI”, which is also agreed by the Paris Club. We look forward to the endorsement of the Common Framework by members, subject to their domestic approval procedures.”
By Zainab Iyamide Joaque