On Wednesday, May 13, 2020, more than a hundred political leaders led by Bernie Sanders across the globe have urged the international financial institutions especially the International Monetary Fund (IMF) and World Bank to waive off the existing debt owed by the poorest countries in response to the coronavirus pandemic.
The widespread virus pandemic has shrunken the global economy, as many analysts believed, that it has rolled towards a deep recession and a global economic meltdown while several poorest countries were facing the most hardships of the pandemic impact.
Bernie Sanders and Omar’ Initiatives
The initiative, which called for waiving off poor countries’ debt, was led by former U.S. presidential candidate Senator Bernie Sanders and Representative Ilham Omar, a Democrat from Minnesota, as it was anticipated that developing countries and emerging economies would be devastated by the pandemic.
The global lockdown prompted by the virus outbreak has impacted badly on economies of poor countries that also have weak health systems, high debt levels, and few resources to manage both health and economic crises.
Canceling the debt of the poorest countries was “the very least that the World Bank, IMF, and other international financial institutions should do to prevent an unimaginable increase in poverty, hunger, and disease that threatens hundreds of millions of people,” Sanders insisted. He added that poor countries needed every cent to care for their people, instead of servicing the “unsustainable debts” they have owed to the large international financial institutions.
Omar insisted that the largest economy, the United States (US) should lead the effort to provide relief to the most vulnerable nations. Omar continued, “All our destinies are linked. If we turn a blind eye to the suffering of people abroad, it will eventually harm us.”
IMF and World Bank’s Stances
Several politician reminded that the world’s institutions have responsibilities to waive off debt service obligations of the poorest countries rather than simply suspended the dues, as agreed by the Group of 20 countries in April. Meanwhile, the lawmakers welcomed a move by the IMF, despite saying further efforts were needed, to cover the debt service payments of 25 of the poorest countries for six months.
IMF Managing Director Kristalina Georgieva said on Tuesday that the institution was “very likely” to revise its forecast since the global output was expected to be contracted by 3% in 2020, and emphasized, thereby, developing countries would need more than $2.5 trillion in financing to face pandemic challenges.
Meanwhile, the World Bank has viewed that it supported the call for helping the poorest countries during such miserable times but warned waiving debt payments could harm its credit rating and undercut its ability to provide low-cost funding to members.
Nonetheless, these politicians argued that the poorest countries, without the IMF and World Bank’s assistance, would not be able to prioritize spending needed to fight the virus, which in turn could lead to continued disruption to global supply chains and financial markets. In addition to this, the lawmakers also urged the IMF’s Georgieva and World Bank President David Malpass to support the creation of trillions of dollars of new Special Drawing Rights, the currency of the IMF, which would avert the global economic meltdown.
I’m Roshan, a journalist, blogger and music lover. I like covering global news related to finance, business, and technology. Focusing on the collection of true and reliable information, I rely on working by conducting interviews with business leaders and talking to the inside sources of companies.
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