$11.3bn in IMF Covid-19 money is being used to service debt, says group | International Monetary Fund (IMF)

$11.3bn in IMF Covid-19 money is being used to service debt, says group | International Monetary Fund (IMF)


The International Monetary Fund has allowed some of the world’s poorest countries to use almost £9bn of Covid-19 bailout cash to pay private sector lenders in breach of its own rules, according to a leading anti-poverty campaign group.

Hard-pressed countries in sub-Saharan Africa, Latin America and parts of Asia that went into the crisis with high levels of debt have used IMF funds intended for health budgets and food imports on loan interest payments, the Jubilee Debt Campaign said.

In a report before a meeting of G20 finance ministers this weekend, the group said private lenders should be forced to reduce loan payments as the price of bailout funds to prevent poor countries from becoming caught in a cycle of debt.

G20 finance ministers, including the UK chancellor, Rishi Sunak, are to discuss at their online meeting how to reduce developing world debt and as a result increase the level of IMF support directed to vital services.

Under its own rules, the IMF must refuse to lend funds to countries it believes have unsustainably high levels of debts unless private sector lenders agree to take a financial “haircut” that reduces the size of outstanding loans.

Tim Jones, the head of policy at the Jubilee Debt Campaign, said 28 countries at high risk of debt default had received $11.3bn (£8.9bn) that would be used to meet private sector debt commitments.

He said IMF funding was effectively bailing out private lenders by enabling poor countries to maintain payments.

Last year the level of spending on debt payments across the global south increased to 14.1% of government revenue, the highest level since 2003, and an increase of 110% since 2010, Jones said.

Kenya and Ethiopia’s debt servicing reach up to 50% of government revenues last year after debt and capital repayments on infrastructure projects built over the previous decade became due.

The IMF said in many cases it avoided forcing recipient countries from defaulting on private debts because “in such circumstances it would only precipitate a sudden loss of access to much needed external funding and forestall the economic recovery”.

Adding that the private sector is a vital source of funds, it said: “As the economy recovers and market conditions improve, repayments to the IMF are partly made from renewed inflows from private creditors.”

Gerry Rice, its chief spokesman, said: “Without the IMF support, countries would often have cut back on other spending in order to continue to meet their external debt obligations, sometimes including to the private sector, which would have undermined their ability to mitigate the impact of the pandemic. Our overriding objective right now is to save lives and livelihoods.”

He said helping indebted countries deal with severe external payments problems was complicated. “It sometimes involves dealing with private sector obligations and without having the country fall into default, which would incur a host of other problems.”

Tim Jones, the head of policy at Jubilee Debt Campaign, said: “We are not saying all IMF funds are paying off private sector debts, but some are. The IMF and G20 need to make private lenders restructure debts so that more public funds can save lives rather than pay private profit.”


Source link

Like this article?

Share on facebook
Share on Facebook
Share on twitter
Share on Twitter
Share on linkedin
Share on Linkdin
Share on pinterest
Share on Pinterest

Leave a Reply

Your email address will not be published. Required fields are marked *