Lawmakers across the Globe push IMF and World Bank to offset the debt of world’s poorest countries

More than 300 lawmakers from around the world pushed the International Monetary Fund and World Bank to write off the debts of the poorest countries to cope with the coronavirus pandemic and help in boosting funding to avert a global economic meltdown.

Earlier, IMF Managing Director Kristalina Georgieva had said that IMF was “very likely” to change downward its forecast that global output would shrink by 3 percent in 2020, and developing countries would need more than $2.5 trillion in funding to overcome the situation caused by COVID-19 pandemic.

The initiative, led by former US presidential candidate Senator Bernie Sanders and Representative Ilham Omar, a Democrat from Minnesota, comes during growing concern that developing countries and emerging economies will be destroyed by COVID-19.

Mr Sanders said poor countries needed every cent to care for their people, instead of servicing the “unsustainable debts” they owe to the large international financial institutions.

“Cancelling 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”

The World Bank has said it will look at ways to expand its support for the poorest countries, but warned waiving debt payments could harm its credit rating and undercut its ability to provide low-cost funding to members. It had earlier attempted to cover the debt service payments of 25 of the poorest countries for six months which was well received by the lawmakers.

In the letter, parliamentarians from two dozen countries on all six continents, said debt service responsibilities of the poorest countries should be cancelled outright, instead of simply delayed, as agreed by the Group of 20 countries in April.

Failing to do so meant those countries would not be capable to prioritise spending needed to fight the virus, which in turn could lead to continued disturbance to global supply chains and financial markets.

The lawmakers also urged the IMF’s Ms 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.

“An issuance of SDRs on the order of trillions of dollars will be required to avert major increases in poverty, hunger and disease,” wrote the lawmakers, who span a wide range of political affiliations and include former heads of state.

An SDR allocation is akin to a central bank “printing” new money and does not trigger big costs, but has been opposed by the US, the IMF’s largest shareholder.

Other signatories to the letter include former British Labour leader Jeremy Corbyn and Argentine lawmaker Carlos Menem, who enacted austerity measures when he served as president in the 1980s and 1990s.