Debt service relief for 28 low-income countries
A second six-month tranche of debt service relief for 28 member countries was approved by the executive board of the International Monetary Fund (IMF) under the Catastrophe Containment and Relief Trust on 2 October. This approval follows the first six-month tranche from 14 April to 13 October 2020 and enables the disbursement of grants from the trust for payment estimated at SDR 161 million for eligible debt service falling due to the IMF from 14 October 2020 to 13 April 2021.
Kristalina Georgieva, managing director of the Catastrophe Containment and Relief Trust, says relief on debt service will free up scarce financial resources for vital emergency medical efforts and other relief efforts while these members combat the impact of the COVID-19 pandemic. She says subject to availability of sufficient resources in the trust, debt service relief could be provided for a total period of two years through to 13 April 2022 estimated at nearly SDR 680 million.
Georgieva launched an urgent fundraising effort that would enable the Catastrophe Containment and Relief Trust to provide relief on debt service for up to a maximum of two years, while leaving the trust adequately funded for future needs in context of the approval of the first tranche. This will need a commitment of about SDR 1 billion with donors providing so far, grant contributions totalling about SDR 360 million from the United Kingdom, Japan, Germany, Netherlands, Switzerland, Norway, China, Mexico, Sweden, Bulgaria, Luxembourg and Malta.
According to Georgieva, the COVID-19 pandemic continues to exact a serious human and economic toll on the fund membership. She says executive directors note that the trust grants for debt service relief on obligations to the fund falling due during 14 April to 13 October 2020 assisted its poorest and most vulnerable members to tackle the pandemic and with the repercussions.
“Executive directors of the Catastrophe Containment and Relief Trust welcomed the country updates on the policy responses to the pandemic of trust beneficiary countries. They underscored the importance of continued follow-through on governance and transparency commitments by beneficiary countries to safeguard priority and COVID-19-related spending,” she says.
Executive directors concurred that countries that received the trust debt relief are mainly pursuing sensible macroeconomic policies to support stability in response to the economic fallout from the pandemic. They also agreed that resources freed up by the initial tranche of Catastrophe Containment and Relief Trust debt service relief were helping to provide emergency health, social and economic support to mitigate the impact of the pandemic on lives and livelihoods. Georgieva says executive directors concurred that the available resources are sufficient to finance a second six-month tranche of debt service relief under the trust and approved grant assistance for relief for 28 of the 29 eligible members. She says they look forward to bringing the proposal for the remaining one member soon and the fund has received grant pledges of just over one-third of the SDR 1 billion fundraising target.
“Executive directors note that available resources will need to be boosted to support the approval of future tranches and welcome the generous contributions in recent months, stressing the importance of ongoing efforts to secure additional resources for timely grant assistance in future. They agree it will be useful to conduct a stocktaking on the Catastrophe Containment and Relief Trust before the end of the second tranche period in April 2021,” says the managing director.