ROSARIO, Argentina – On Easter Sunday, Pope Francis issued a call for reduction if not the forgiveness of the debt burdening the balance sheets of the world’s poorest countries so that they can better tackle the COVID-19 pandemic.
On Monday, the International Monetary Fund approved $500 million to cancel six months of debt payments for 25 of the world’s most impoverished countries: Afghanistan, Benin, Burkina Faso, Central African Republic, Chad, Comoros, the Democratic Republic of Congo, Gambia, Guinea, Guinea-Bissau, Haiti, Liberia, Madagascar, Malawi, Mali, Mozambique, Nepal, Niger, Rwanda, São Tomé and Príncipe, Sierra Leone, Solomon Islands, Tajikistan, Togo and Yemen
The next day, the IMF published a report that the “great lockdown” could cause the worst economic crisis since the Great Depression and predicted the global economy will lose at least $9 trillion in 2020 and 2021.
Some believe that such unprecedented global challenge demands an unprecedented response.
Among them is Eric LeCompte, executive director of Jubilee USA Network, an alliance of more than 75 U.S. organizations and 700 faith communities working for debt relief. He called the International Monetary Fund (IMF) announcement “an incredibly positive step.”
Yet, despite the impact the IMF decision will have, LeCompte says “many of the biggest decisions are yet to come.”
“This is the most frightening news the Fund has ever released on the status of our global economy,” he said in a statment. “When you analyze what the IMF is actually saying, the message is things could even get worse and they really don’t know how bad it can actually get.”
According to the expert, what happened with the IMF this week “expands a debt relief mechanism and grant mechanism we created in 2010 for Haiti after the earthquake and then expanded again for Liberia, Sierra Leone and Guinea in 2014 during the Ebola epidemic.”
As for the decisions yet to come, LeCompte told Crux that the G20 is meeting on April 15 to make decision on suspending the debt payments for 76 of the poorest countries that owe money to G20 countries.
“These are the ‘IDA’ or World Bank International Development Association countries – the world’s poorest countries that receive concessional lending and grants,” LeCompte explained. “More than 65 percent of people who live in extreme poverty in our world call these 76 countries home.”
Ongoing behind-closed door discussions involve the suspension of debt payment for 6 to 9 months.
“If this campaign of ours moves forward, it will mean immediate money can be used to bolster health systems in the developing world,” LeCompte said. “There are other decisions that will be made to support countries in accessing a big reserve (Special Drawing Rights) for immediate financing.”
Pope Francis is far from being the only religious leader to call for a debt reduction so that the poorer countries can better confront this invisible enemy. The list includes the United States conference of Catholic Bishops, and as of Tuesday, the Episcopal, Presbyterian, Methodist and Lutheran churches, together with the United Church of Christ, American Friends Service Committee, the National Council of Churches and Church World Service: All are endorsing debt relief, improving the financial system, reform of bankruptcy laws, and curbing tax evasion and corruption.
LeCompte told Crux that over the next few days there will be several decisions made affecting different groups and lenders. For instance, the G20 meeting could make $25 billion immediately available for the world’s 76 poorest countries to provide bolstering for health services as they try and tackle the coronavirus crisis.
This, he argued, would be important because “some of these countries have zero critical care unit beds, [and] most have less than 50.”
China – where the coronavirus has its origins – is resisting making this fund available, he said, “but I think we’ll be able to push China to make the right decision.”
“We are also calling for the IMF and World Bank to cancel debt payments,” LeCompte said. “Because the IMF has a $140 billion dollar gold reserve according to our analysis, [so] they can afford debt cancellation on many levels.”
Over the next three days, the G7, G20, IMF and World Bank will meet to make other plans to deal with the growing crisis.
“Urgent action is required by the IMF and G20 this week,” said LeCompte. “During the meetings this week world leaders must move forward aid, financing and debt relief for developed and developing countries so people can survive the devastating health and economic impacts of the coronavirus crisis.”
Follow Inés San Martín on Twitter: @inesanma