AndrewGlobal banks and international financiers said they would be willing to grant short-term debt relief to the world’s poorest countries hammered by the financial fallout from the coronavirus.
In a letter to the International Monetary Fund (IMF) and World Bank (WB), Institute of International Finance president Timothy Adams said private-sector creditors should commit to forgo debt payments until the end of the year without declaring borrowers in default.
The extraordinary offer by the global trade association for the financial services industry comes ahead of a crucial meeting of the IMF and World Bank next week at which aid to emerging markets and developing nations will be high on the agenda.
Adams said this lender forbearance should be accompanied by similar actions by creditor countries and should cover all forms of private-sector debt — with foreign and domestic financiers treated alike.
“For vulnerable countries now, facing acute health care and humanitarian challenges, servicing and managing these debt obligations will be close to impossible,” he said.
$140 billion
The institute estimates that the world’s poorest nations have some US$140 billion in general government debt-service obligations due through the end of the year, including US$10 billion in foreign currency.
The IMF and World Bank have already called for a standstill of debt-service payments to official bilateral creditors for the world’s poorest countries.
The IIF offer would dovetail with that and help reassure creditor countries that the money freed up by their forbearance would not be used to pay private-sector lenders.
While the IIF is a broad-based organisation that counts the world’s leading banks and financial institutions as members, many creditors to the poorest nations fall outside its ambit — a fact that Adams alluded to in his letter — raising questions about how effective its offer of relief will prove to be.
“The creditor base for low-income developing countries has changed dramatically in recent years,” Adams said.
Creditors now include institutional investors and other bond holders and countries outside the Paris Club of official lenders, including China and Saudi Arabia.
Adams said close debtor-creditor coordination across a broad range of borrowing countries will be needed during the coronavirus crisis and its aftermath.
“During the current crisis and anticipated debt restructuring negotiations, exceptional efforts to maintain dialogue will be required,” he wrote.
“The IIF would be pleased to support such dialogue, including exploration of market-based approaches to debt service problems prior to default.”
The letter, dated Thursday, was also sent to the Paris Club and the Organisation for Economic Cooperation and Development. — Bloomberg.
Online Reporter