“Debt Suspension Initiative gives developing countries more resources”- World Bank
Amaka E. Nliam
The World Bank has said that the Debt Service Suspension Initiative is a way to give developing countries more resources in the light of the global pandemic.
Dr. Marcello Estevao, Global Director, Macro Economics, Trade and Investment at the World Bank said this in an interview via Twitter, @WorldBank.
The Debt Service Suspension Initiative, which took effect on May 1, 2020, has been helping countries concentrate their resources on fighting the coronavirus pandemic and safeguarding the lives and livelihoods of millions of the most vulnerable people. So far, the initiative has delivered about $5 billion in relief to more than 40 eligible countries.
“Many developing countries had already been on a worrisome debt path even before COVID hit. If you look at the average debt ratio to GDP for all the countries that borrowed from IDA, the World Bank Grant and concessional lending arm, we saw reductions till 2013 in that ratio, including because of past debt forgiveness and high economic growth rate in the first decade of the 2000s.
“But since then as a Group, that debt ratio has been increasing and the crisis exacerbated this trend because of the impact of the health crisis on the economy and thus the ability of the countries to repay their financial commitments and the need that they have to deal with the crisis.
“The crisis affects country’s ability to produce goods and services and export them, which had reduced fiscal revenues drastically. There’s also great pressure to spend more to protect the vulnerable parts of the society.
“Fiscal spending has been rising, which increased financing needs for all countries…” said Dr Marcello Estevao.
“The Debt Service Suspension Initiative is a way to give developing countries more resources at a time when they need them the most.” Watch @MarcelloEstevao on empowering countries to fight and recover from #COVID19. #ExpertAnswers
— World Bank (@WorldBank) February 15, 2021
The World Bank and the IMF support implementation of the Debt Service Suspension Initiative—by monitoring spending, enhancing public debt transparency, and ensuring prudent borrowing.
Amaka E. Nliam
