The World Bank and International Monetary Fund (IMF) on Wednesday announced the suspension of debt repayments by Nigeria and other countries indebted to the International Development Association, known as IDA countries, to cushion the effect of the COVID-19 pandemic on them.
The IDA, a member of the World Bank Group, is an international financial institution which offers concessional loans and grants to the world’s poorest developing countries.
According to the two Brent Wood institutions, “The coronavirus outbreak is likely to have severe economic and social consequences for IDA countries, home to a quarter of the world’s population and two-thirds of the world’s population living in extreme poverty.”
The organisations said, “With immediate effect—and consistent with national laws of the creditor countries—the World Bank Group and the International Monetary Fund call on all official bilateral creditors to suspend debt payments from IDA countries that request forbearance. This will help with IDA countries’ immediate liquidity needs to tackle challenges posed by the coronavirus outbreak and allow time for an assessment of the crisis impact and financing needs for each country.”
Nigeria is on blend credit terms with IDA but also creditworthy for some International Bank for Reconstruction and Development (IBRD) borrowing.
The two bodies also called on the G20 leaders to make the assessments, including identifying the countries with unsustainable debt situations, “and to prepare a proposal for comprehensive action by official bilateral creditors to address both the financing and debt relief needs of IDA countries. We will seek endorsement for the Proposal at the Development Committee during the Spring Meetings.”
The World Bank and IMF said given the current situation, it was imperative to provide a global sense of relief for developing countries as well as a strong signal to financial markets.