The World Bank and International Monetary Fund have called for the suspension of debt repayments for poorer countries as many of them turn to focus on battling the Coronavirus (COVID -19).
In a joint statement on Wednesday night, the two multi-lateral lenders said the Coronavirus outbreak is likely to have severe economic and social consequences for the International Development Association (IDA) countries, which make up two-thirds (66%) of the world’s population living in extreme poverty.
IDA countries are those whose people earn low incomes per year. Uganda is among these countries. The two institutions’ call is directed at the G20 – the 20 most industrialised countries – that are bilateral lenders to the poor countries. China is the biggest lender here.
The statement said, “with immediate effect—the World Bank Group (WBG) and the International Monetary Fund (IMF) call on all official bilateral creditors to suspend debt payments from IDA countries that request forbearance.”
It said this will help countries’ immediate liquidity needs to tackle challenges posed by the Coronavirus outbreak.
Poorer countries’ debt has grown exponentially since 2008 with analysts predicting debt stress for many of them. The debt was accumulated to build infrastructure and push up growth.
In an earlier report, the World Bank said by the end of 2018, poorer countries had accumulated a total of $387 billion in external debt stock, more than double the level of a decade earlier.
External debt among Sub-Saharan African countries, where Uganda falls, grew faster than in other regions.
Uganda’s debt stock has grown by 437 percent since 2008, the World Bank says. Other countries that have had swift debt growth include Ethiopia (885%), Zambia (521%), and Ghana (395%). Uganda’s public debt currently stands at $12.4bn (Shs 47tn).
Yet in the face of the Covid-19, these countries are facing challenges of where to get money to pay back as many are not collecting enough revenues with businesses on standstill.
On Wednesday, Uganda ordered a partial lock-down with public transport suspended for 14 days.