$11.3bn of IMF loans are being used to bail out private lenders
New research from Jubilee Debt Campaign shows how IMF loans to 28 highly indebted countries are enabling debt repayments to private lenders during the Covid-19 crisis
The research was released ahead of the G20 Finance Ministers meeting which discussed the failure of private lenders to take part in the G20 Debt Service Suspension Initiative.
$11.3 billion of IMF loans issued to help countries heavily impacted by the coronavirus crisis are effectively being used to bail out private lenders, according to new research released today by Jubilee Debt Campaign. The loans to 28 highly indebted developing countries are enabling interest and debts to private creditors to keep being paid.
Of the 77 countries the IMF has agreed loans for since the crisis began, Jubilee Debt Campaign has identified 28 countries which are highly-indebted on the IMF’s own metrics, and which are making payments to private lenders. According to its own rules, the IMF should not lend to countries with unsustainable debts unless there is a debt restructuring, so that its resources are not used to bail out previous lenders.
The IMF has also argued that “debt restructurings have often been too little and too late, thus failing to re-establish debt sustainability and market access in a durable way”. However, the Jubilee Debt Campaign research argues that the IMF is partly to blame for this as it often breaks its own policy by lending to countries with high debts, thereby delaying necessary debt restructurings.
G20 Finance Ministers met on 18-19 July and discussed the implementation of their Debt Service Suspension Initiative, agreed in April 2020. Under the initiative, up to 73 countries can request a suspension of debt payments to other governments for May to December 2020. The G20 also called on private lenders to “participate in the initiative on comparable terms”, but none have yet done so.
It is the duty of the international community to avoid adding a debt crisis to dozens of developing countries that are already dealing with health, humanitarian, hunger and economic crises. Preventing a global disaster demands widespread and concerted debt relief and significantly more financing.