Poorest countries can now seek debt relief – World Bank

The President of the World Bank Group, David Malpass, has announced the beginning of a debt relief initiative for the world’s poorest countries.

Malpass said the International Development Association countries could suspend debt repayment “if they request forbearance”.

The International Bank for Reconstruction and Development and the IDA make up the World Bank. The IDA provides concessionary loans – called credits – and grants to governments of the poorest countries.

Malpass said, “We’re proceeding at full speed with our COVID-19 support. Using the fast-track approach developed in April, the World Bank is currently assisting 93 countries with COVID-related health projects, with support in another 18 countries expected shortly.

“In March, IMF Managing Director Kristalina Georgieva and I called on official bilateral creditors to grant a debt suspension to countries eligible for International Development Association financing – the world’s poorest countries – to help provide extra financial support to help respond to the COVID-19 pandemic.

Malpass said during the Spring Meetings, the governors of the World Bank and IMF and the finance ministers of the G7 and G20 supported a May 1 start date.

He said the G20 countries agreed on a coordinated approach, with a common term sheet providing the key features for a debt service suspension initiative. 

He added that private creditors were also called on to participate in the initiative on comparable terms. 

Malpass said, “In addition to financial support, the initiative provides an important opportunity for IDA countries to enhance transparency and fully disclose their public sector’s financial commitments. 

“Debt and investment transparency are high priorities in order to improve the quality of a country’s financial commitments and encourage more investment.”

According to him, the World Bank and IMF are working together with IDA countries to evaluate their debt sustainability and transparency and monitor their use of the savings on debt service.