World Bank’s Debt Suspension Initiative To Save Poor Countries $11.5bn

The Debt Service Suspension Initiative which is being implemented by the International Monetary Fund and the World Bank Group would save poor countries about $11.54bn.

The figure was arrived at based on analysis of a World Bank Report on “Covid 19: Debt Service Suspension Initiative.”

In April, the World Bank’s Development Committee and the G20 Finance Ministers had endorsed the Debt Service Suspension Initiative in response to a call by the World Bank and the IMF to grant debt-service suspension to the poorest countries to help them manage the severe impact of the Covid-19 pandemic.

It was agreed that debt-service suspension with broad and equitable participation was urgently needed to allow low-income countries to concentrate their resources on fighting the pandemic.

The G20 had called on private creditors to participate in the initiative on comparable terms as Covid-19 had triggered the deepest global recession since World War II. 

A breakdown of the $11.54bn debt service savings showed that Afghanistan could get up to $39.1m in savings, Angola $2.65bn,  Burkina Faso $23.3m, Cape Verde $14.9m, Cameron $276.1m, Central African Republic $6.3m and Chad $61m.

There is also Comoros which is expected to benefit about $2.3m, Democratic Republic of Congo $104.4m, Republic of Congo $146.2m, Cote d’Ivoire $231.3m, Djibouti $59.2m, Dominica Republic $4.2m.

Similarly, Ethiopia is to benefit $511.3m from the debt service suspension programme,  The Gambia $11.5m, Grenada $7m,. Guinea $126.3m, Pakistan $2.7bn and Senegal $131.7m among others.

The World Bank in the report said the main goal of the DSSI is to allow poor countries to concentrate their resources on fighting the pandemic and safeguarding the lives and livelihoods of millions of the most vulnerable people.

The Report said the IMF and the World Bank are supporting the implementation of the DSSI by monitoring spending, enhancing public debt transparency, and ensuring prudent borrowing. 

A key objective of the DSSI, according to the Report is to enable an effective crisis response.

It said borrowers must therefore commit to use freed-up resources to increase social, health, or economic spending in response to the crisis. 

It noted that beneficiaries must also commit to disclose all public sector financial commitments involving debt and debt-like instruments. 

“Sound data on public sector financial commitments will improve assessments of debt sustainability and financing needs.

“Greater debt transparency is critical to help countries make more informed borrowing and investment decisions and to attract foreign direct investment. 

“Under the DSSI, countries also commit to limit their non-concessional borrowing as supported by ceilings under IMF programs and the World Bank’s non-concessional borrowing policies,” it said.