$11.3bn of IMF Covid-19 loans went to countries still paying back private lenders

17 Jul 20

Some coronavirus loans from the IMF are effectively being used to pay back loans from private lenders, without any of the money being used by the countries themselves to respond to the pandemic, a campaign group has warned.

 

Jubilee Debt Campaign, which lobbies for developing world debt to be cancelled, has found that $11.3bn of loans have gone to countries where this is the case.

Of the 77 countries the IMF has agreed loans for since the crisis began, Jubilee identified 28 that are classified as ‘highly indebted’ by the IMF but are still making payments to private lenders.

The group said that according to its own rules, the IMF should not lend to countries with unsustainable debts unless those debts are restructured, in order to prevent its resources being used to pay private lenders.

“Public money should be used for public benefit – in this case helping governments to tackle a major global pandemic, not private profit,” said Jubilee’s head of policy Tim Jones.

“The IMF has rightly criticised private lenders for refusing to take part in the G20 debt suspension initiative, but it needs to align its words and actions and help highly indebted countries restructure debts, rather than providing the money to ensure high-interest private loans keep being paid.”

IMF chief spokesman Gerry Rice said the organisation had moved “with unprecedented speed” to help governments who would have otherwise struggled to deal with the crisis, and stressed that its emergency financing arrangements are for urgent imports of food, medicine, medical equipment and other necessities.

“Without the IMF support, countries would often have cut back on other spending in order to continue to meet their external debt obligations, sometimes including to the private sector, which would have undermined their ability to mitigate the impact of the pandemic,” he said.

“Our overriding objective right now is to save lives and livelihoods.”

He said IMF funds are not “used simply to pay off private sector debts”, although in some cases it is preferable to make sure these debts are paid.

“Our funds are used to help countries to make external payments of any kind, first and foremost to purchase goods needed to save lives in this crisis,” he said.

“But helping a country deal with severe external payments problems is complicated. It sometimes involves dealing with private sector obligations and without having the country fall into default, which would incur a host of other problems.”

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