An alliance of non-governmental organisations, comprising ONE, Oxfam and erlassjahr.de, is calling on the German government to lobby for an immediate stop to debt service payments by the world’s poorest countries.
The NGO alliance said, “In many African countries, debt service payments take up more place in the budget than investments in education, health or social security. Not only do they lack the financial leeway to effectively tackle the corona crisis in their countries, but in the worst case, they are even threatened with national bankruptcy.”
ONE, Oxfam and erlassjahr.de urgently appealed to German Finance Minister, Olaf Scholz, “We sound the alarm! The world’s poorest countries are in the middle of a liquidity and sometimes even a solvency crisis. They simply have no money to finance anti-corona measures on the ground. This is an insanity that we can put an end to.”
“So that the affected countries can breathe again,” the NGOs called on the minister to work for an international freeze on debt repayments during the 4th G20 Finance Ministers and Central Bank Governors (FMCBG) Meeting, holding virtually on Wednesday to discuss global economic development and support a swift and sustained global economic recovery.
Moreover, the NGO alliance demands that the G20 countries and the International Monetary Fund extend their current debt moratorium, which expires at the end of the year, until the end of the pandemic. In addition, the World Bank and private creditors should also join to relieve poorer countries.
A growing number of African countries, some already in humanitarian crisis, will soon have to choose between servicing their debts or helping their most vulnerable citizens, as even the World Bank and the International Monetary Fund are warning of the looming debt crisis.
In September, the Zambian government requested debt service relief from its commercial creditors and a six-month interest payment delay on its Eurobonds due in 2022, 2024 and 2027. Consequently, Zambia is set to become the first African country to default on its private debt since the Covid-19 pandemic broke out.
The 76 countries with the lowest incomes owe at least $573 billion in debt and are due to pay about $41 billion to service those debts in 2020, according to ONE. The debt repayment obligations is compounded by rising government expenditure, dwindling tax revenues and falling remittances.
Development economists say the impacts of COVID-19 and the global recession threaten to push 150 million people into extreme poverty.
World Bank chief David Malpass has warned that if the crisis is unchecked, the impact of the recession could threaten social order and democracy in many of the affected countries, adding that “enormous budget deficits and debt payments” are “overwhelming” some countries.