Commonwealth Seeks Urgent Freeze on All Developing Nations’ Debt

LAGOS (Capital Markets in Africa) — Many small, vulnerable states are missing out on debt relief and financial support to help weather damage from the coronavirus pandemic because of outdated eligibility criteria, Commonwealth Secretary-General Patricia Scotland said, calling for an “urgent” moratorium on external debt repayments for all developing countries.

The rules to qualify for support from bodies such as the International Monetary Fund and for the Group of 20’s debt suspension initiative are based mainly on per-capita income that classifies many tourism-reliant island nations as middle- or high-income countries, without taking into account current challenges that include extreme climate events and economic crises, Scotland wrote in an opinion piece on Tuesday.

The IMF’s $213.4 million of debt relief in April for 29 of the world’s poorest nations benefits six of 54 Commonwealth countries, including Gambia, Malawi, Mozambique, Rwanda, Sierra Leone, and Tanzania. But it doesn’t cover 25 small island developing states in the grouping that remain prone to the existential threat of climate change, Scotland wrote.

The G-20 has offered to temporarily suspend debt repayments for more than 70 nations classified as least developed countries or that meet certain criteria under the World Bank International Development Association. In this regard, 30 Commonwealth members are eligible, but nations such as Jamaica, Belize, and Eswatini don’t qualify because their average annual income per person is above the $1,175 threshold or they are deemed creditworthy enough to borrow from other funds, she said.

“While acknowledging these huge efforts of the global community to deal with the financial impacts of the pandemic, it is clear the nature and size of the support on offer is simply not enough,” Scotland said.

Source: Bloomberg Business News