The World Bank is currently mulling possible cut on the debt stock of poor countries, under the Debt Service Suspension Initiative, rather than merely restructuring or delaying repayment on such loans.
President of the World Bank Group, David Malpass, who disclosed this in an interview with Bloomberg Television said the annual meetings of the World Bank and the International Monetary Fund (IMF) in October present a good timeframe for action.
This is after the Speaker of the House of Representatives, Femi Gbajabiamila and some African Speakers of Parliaments, said there was an urgent need to push for debt cancellation for the continent from multilateral and bilateral partners.
“It is safe to say that the burden of debt servicing, vis-à-vis spending on education and health care for example, is a threat to our continent’s stability and development, especially in the era of COVID-19,” Gbajabiamila.
As of March 2020, Nigeria owed the World Bank Group $9.81bn, rising by $1.3bn in just one year, data from the Debt Management Office (DMO) show.
The International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA), which makes up the World Bank, have over the years advanced loans to Nigeria.
IBRD lends to governments of middle-income and creditworthy low-income countries while the IDA provides concessionary loans – called credits – and grants to governments of the poorest countries.
Nigeria’s debt to the IDA and IBRD stood at $9.68bn and N409.51m as of March 31, 2020, compared to $8.78bn and $124.18m as at March 31, 2019, according to the DMO data.
The World Bank chief said the Debt Service Suspension Initiative that started in May and will extend into 2021 an option that he believes will receive support from the G7 Group and Group of 20 leading economies.
“The next step is harder agreement to actually do haircuts or write-downs. But that has happened in the past, for example, in the 1980s in the Latin debt crisis, it got to the point of haircuts… So one of the things we’re trying to do is accelerate that so you can get to a good outcome sooner.”
The G-20 countries, during a meeting in July, agreed to extend the current debt payment suspension towards the end of the year, putting off assurances of additional relief as the coronavirus pandemic continues to cause global damage.
Even the G-20 April agreement to give up bilateral debt payments from vulnerable countries, the cost of servicing the debts outweighs health and social expenses.
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