‘CREDITORS SHOULD GIVE RELIEF TO LOW-INCOME COUNTRIES’

PRIVATE creditors should provide temporary standstill on official debt service payments by low-income countries to help them preserve international liquidity.

The countries will then be able to channel resources towards combating the Covid-19 pandemic.

Liquidity assistance is urgently needed for countries confronting health shocks and external funding shortfalls, says the International monetary Fund (IMF).

IMF in its World Economic Outlook Update for June 2020, indicated that multilateral assistance through the global financial safety net could help further cushion the impact of funding shocks.

It indicated that countries must cooperate on multiple fronts to combat the shared challenges considering the global scale of the crisis.

The IMF said as the G20 initiative for a temporary standstill on official debt service payments by low-income countries, private creditors should also provide comparable treatment.

“More generally, it is in the best interest of all creditors and low-income country and emerging market borrowers with high debt and large financing needs to quickly agree on mutually acceptable terms of debt relief where needed,” IMF said.

The IMF said it had enhanced the access limits to its emergency financing facilities, increased its ability to provide grant-based debt service relief, and was helping vulnerable countries with new financing through other lending facilities.

It said other elements of the global financial safety net had also been activated to alleviate international liquidity shortages in emerging markets, including central bank swap lines.

“The longer the pandemic and its aftermath persist, the greater the need to enhance efforts to support financially constrained economies.

“Beyond the pandemic, policymakers must cooperate to address the economic issues underlying trade and technology tensions as well as gaps in the rules- based multilateral trading system,” The Fund said.

The IMF warned that the eventual recovery from the Covid-19 crisis would be endangered without a durable solution to these frictions.

Beyond the pandemic, policymakers must cooperate to address the economic issues underlying trade and technology tensions as well as gaps in the rules-based multilateral trading system.