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The World Bank arm that provides help to the poorest countries plans more concessional loans and grants to nations facing higher risks of debt distress, a move that could unlock impasses hindering the restructure of billions of dollars of debt held by low-income nations.
The plans for the International Development Association were announced Wednesday following a meeting of creditor and debtor nations known as Global Sovereign Debt Roundtable — a forum helmed by the International Monetary Fund, World Bank and the 2023 Group of 20 president India to iron out issues with handling debt restructurings for cash-strapped nations. Those include sticking points in the G-20’s own so-called Common Framework on tackling debt relief.
IDA’s provision of positive net flows and “implicit debt relief through increased concessionality and grants to countries facing higher risks of debt distress was welcomed,” roundtable participants said in a statement.
China — the biggest bilateral creditor to poor countries — had pushed to reschedule payments rather than take losses and also wanted multilateral development banks to accept so-called haircuts, or otherwise participate more in debt relief. The move on Wednesday could help meet that demand.
The US — which is the biggest shareholder in the World Bank — opposes the inclusion of loans by multilateral development banks in any debt restructuring, arguing that any haircut would undermine those bodies’ ability to respond to crises and make concessional loans. – Bloomberg
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