IMF grants immediate debt relief to 25 countries, excludes Nigeria
$3.4 billion is being sourced from the IMF by Nigeria
International Monetary Fund (IMF) on Monday granted immediate debt relief for 25 countries, most of them in Africa.
In a statement by , the Managing Director of the IMF, Kristalina Georgieva said it would provide $500 million in grant-based debt service relief to these countries.
IMF said, “Today, I am pleased to say that our Executive Board approved immediate debt service relief to 25 of the IMF’s member countries under the IMF’s revamped Catastrophe Containment and Relief Trust (CCRT) as part of the Fund’s response to help address the impact of the COVID-19 pandemic.
“This provides grants to our poorest and most vulnerable members to cover their IMF debt obligations for an initial phase over the next six months and will help them channel more of their scarce financial resources towards vital emergency medical and other relief efforts.
“The CCRT can currently provide about US$500 million in grant-based debt service relief, including the recent US$185 million pledge by the UK and US$100 million provided by Japan as immediately available resources.
“Others, including China and the Netherlands, are also stepping forward with important contributions. I urge other donors to help us replenish the Trust’s resources and boost further our ability to provide additional debt service relief for a full two years to our poorest member countries.”
The countries that will receive debt service relief today are: Afghanistan, Benin, Burkina Faso, Central African Republic, Chad, Comoros, Congo, D.R., The Gambia, Guinea, Guinea-Bissau, Haiti, Liberia, Madagascar, Malawi, Mali, Mozambique, Nepal, Niger, Rwanda, São Tomé and Príncipe, Sierra Leone, Solomon Islands, Tajikistan, Togo and Yemen.
Nigeria’s government had requested financial assistance of $3.4 billion from the IMF under the fund’s Rapid Financing Instrument (RFI). This emergency financing would allow the government to address additional and urgent balance of payments needs and support policies that would make it possible to direct funds for priority health expenditures and protect the most vulnerable people and firms.
The benefit of this move could come in form of a two to three years forbearance on interest payments on external loans across for the. As at December 2019, Nigeria had external debt of $27.7 billion and expended $1.3 billion in debt service. 24.7% of the debt service went to multilaterals like the World Bank and the AFDB.
Nigeria’s former Finance Minister and former World Bank Managing Director, Dr. Ngozi Okonjo-Iweala, underscored the need for this respite when she recently told the BBC that countries in debt such as Nigeria need to apply for such relief to free up resources to battle COVID-19, noting if African countries get debt relief, the monies they should pay in servicing debts, which for Nigeria is N2.72 trillion in the 2020 budget could be channelled towards dealing with the COVID-19 driven economic emergency.
Nigeria’s drawdown request from the IMF is in line with a COVID-19-related provision that allows nations to draw down between 50.0%-100.0% of their contributions without facing the usual loan conditionality of the IMF.
The International Monetary Fund Managing Director, Ms. Kristalina Georgieva, in a statement on April 7, 2020 acknowledged Nigeria’s critical economic situation in response to the country’s request for the fund’s assistance and pledged swift response to country’s request.
“Nigeria’s economy is being threatened by the twin shocks of the COVID-19 pandemic and the associated sharp fall in international oil prices. President Buhari’s administration is taking a number of measures aimed at containing the spread of the virus and its impact, including by swiftly releasing contingency funds to Nigeria’s Centre for Disease Control and working on an economic stimulus package that will help provide relief for households and businesses impacted by the downturn”, She stated.