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Increase debt relief for developing countries



| Update:
May 30, 2020 9:58:04 PM


Even before COVID-19 began its deadly spread across their borders, developing countries were absorbing severe economic shockwaves emanating from China and advanced economies. And now, in addition to falling commodity prices and falling export demand, they are facing a sharp drop in emigrant and expatriate remittances, the disappearance of tourism, outings. sudden and massive foreign capital and currency depreciation.

Almost overnight, dozens of low-income countries became unable to repay their debts to sovereign and commercial creditors.

Despite all the talk about a global economic recovery later this year, policymakers in developing countries increasingly fear a prolonged slowdown. And now they must prepare for the impact of a deadly disease while lacking both adequate health infrastructure and the financial firepower of advanced economies.

Without immediate international action, developing countries will therefore be faced with a huge humanitarian crisis. The Managing Director of the International Monetary Fund, Kristalina Georgieva, recently warned that 170 countries could experience negative per capita income growth in 2020. In the developing world, this will cause crushing hardship for people already struggling to meet their needs. of their family. In fact, given widespread lockdowns aimed at tackling the spread of the virus, many stand to lose far more than their jobs: it’s not alarmist to say they could starve.

Of course, the international community has taken important steps to buy time for developing countries. The IMF and World Bank recently announced debt service relief for the world’s poorest countries until the end of 2020, and are rapidly disbursing additional funding – mostly in the form of additional loans. G20 governments have followed suit by freezing repayments on bilateral loans owed this year and called on commercial creditors to follow suit – a result that could free up to $ 40 billion.

More importantly, China has joined the G20 initiative, having previously refused to join multilateral debt relief efforts. A few years ago, the Chinese government vetoed a proposed Paris Club membership by sovereign creditors. Last year, he was also reluctant to share data with the IMF regarding debt restructuring in Africa.

However, the moratorium only postpones the day of the accounts by a few months. If debt payments resume next year, low-income countries will still face a burden that is hampering their response to the crisis. One solution would therefore be for the G20 to extend its debt service freeze until at least 2021, potentially making more than $ 50 billion available next year.

But now is also the time to consider major debt relief – perhaps along the lines of the Heavily Indebted Poor Countries (HIPC) Initiative, the most recent multilateral debt relief program. This program – launched in the mid-1990s under the auspices of the IMF and the World Bank, and with the participation of the Paris Club – provided about $ 76 billion to 36 countries, boosted social spending in the poorest economies and helped spark a resurgence, especially in Africa.

Before the pandemic struck, sovereign creditors were determined to avoid another HIPC-type effort. But this crisis will inevitably force a reassessment, and an extension of the debt service moratorium should be the first step in that direction.

Private sector creditors have so far been reluctant to embark on a moratorium, but some over-indebted countries are already moving towards restructuring, including of their Eurobond obligations. And while commercial lenders insist that creditor governments should not impose a “top-down” solution, past debt relief models suggest a variety of options, including Brady-style debt swaps and a buyout financed by the Bank. the World Bank like the one undertaken during the HIPC program.

The IMF and the World Bank should lead the way for the next step in debt relief, as they did with the HIPC initiative. Admittedly, the two institutions face financial and legal obstacles, including the obligation to offset their debt relief with their own funds – either contributions from member countries or gold reserves. But an international consensus on the need for debt relief can overcome these obstacles.

China’s participation will be essential, as its loans to Africa alone currently total at least $ 152 billion. China has been extremely hesitant to restructure – let alone forgive – these loans, but has publicly embraced the debt moratorium. At the same time, the Chinese authorities’ continued insistence on bilateral debt negotiations and “market principles” suggests that rhetoric has yet to catch up with practice.

It is essential that Chinese leaders understand the economic and political danger of a developing country debt crisis. Now is the time for China to prove that its recent massive lending to poorer countries was not motivated by debt trap diplomacy, as some have claimed. And the best way to do this is through a multilateral solution that works for both borrowers and lenders.

The same goes for all creditors. Postponing the day of calculating debt on debt will only make the pain of developing countries worse. To help them respond effectively to the twin crisis of disease and recession, the international community must offer swift, bold and comprehensive assistance.

Josh Lipsky, former Senior Communications Advisor and Speechwriter on the Management Team of the International Monetary Fund, is Director of Programs and Policy for the Global Business and Economics Program at the Atlantic Council. Jeremy Mark is a former senior communications advisor and speechwriter on the management team of the International Monetary Fund.

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In search of debt relief, Angola opens oil fields to China

This month, Angola reduced the number of oil shipments sent to China to pay off its debts, and also said it had asked for G20 debt relief.

Oil-backed loans represent about two-fifths of Angola’s external debt and most of its obligations to China.

Luanda and Beijing ”both have good reasons to move away from the current model“Oil used for debt service,” said Nick Branson, senior analyst for Africa at Verisk Maplecroft in London.

READ MORE Angola is coronavirus collateral damage hit by oil and China

Since entering an IMF program in December 2018, Angola has come under increasing pressure from the fund to pay off its secured debts, Branson said.

Verisk Maplecroft expects Luanda to offer Beijing an increase in equity stakes in the six oil fields where Angolan and Chinese oil companies are partners under the banner of Sonangol Sinopec International (SSI).

  • This would replace ongoing crude shipments and fit into Sinopec’s strategy to invest in high-quality production assets, Branson said.
  • Verisk expects Sinopec to acquire part of Sonangol’s stake in Total block 32 or Eni’s 15/06 block.

READ MORE Angola: on the trail of the stolen billions

Branson predicts that the regulator, the Angolan National Petroleum, Natural Gas and Biofuels Agency (ANPG) offer Sinopec preferential treatment in discovered resource opportunities, such as marginal fields, where tax conditions are attractive at lower crude prices, and undeveloped areas owned by dormant indigenous companies.

  • “It would be a much more attractive opportunity than the onshore blocks that the ANPG plans to offer as part of its 2020 license cycle,” he said.

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Debt negotiations with Beijing have already started and it is “Really essential” for Angola to obtain some form of relief, says Thea Fourie, Senior Economist for Sub-Saharan Africa at IHS Markit in Centurion, South Africa.

READ MORE Coronavirus: how China intends to restore its image in Africa

  • She notes that in 2015-2016, Angola renegotiated bilateral loans from China and Brazil to reduce repayments.
  • Despite a partial rebound, oil remains well below the $ 55 per barrel assumed in the original 2020 national budget.
  • At current levels, according to Fourie, significant fiscal adjustments, including cuts in government spending and additional funding for a larger budget deficit, will be needed.

Juvelino Domingos, economist in Luanda, expects Angola to get debt relief from China and G20 if necessary.

  • “China is still determined to support Angola and ready to absorb some risks with the debt refinancing and, in an extreme scenario, to forgive some of it,” he said.
  • “The G20 decision may not be to the extent desired, but it can add value to the body of efforts that the executive has put in.”
  • The chances of not getting relief from the G20 are “remote,” he said.

Angola can make necessity a virtue by reduce losses suffered by public enterprises, says Domingos. “This can be achieved by speeding up the privatization process, divesting non-performing assets and limiting the recapitalization of these companies to well-defined restructuring plans.”

At the end of the line : Angola is in a good position to obtain debt relief, but must use it to rationalize its state-owned enterprises.


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As COVID concerns continue, employers shouldn’t forget the student debt crisis

As employers navigate the current crisis caused by COVID-19, many are re-evaluating their benefits and in some cases reducing the benefits employees rely on. But as employers strive to manage their bottom line, there are low-cost, high-impact benefits they can – and should – consider.

When determining which benefits will benefit employees the most, employers should consider what causes the most stress. For example, employees who worry about their financial health are often less productive when they are at work. Almost 78% of employees suffering from high financial stress report that they are distracted by this stress at work.

Therefore, plan sponsors and benefit administrators may want to consider one of the biggest financial hurdles employees face, especially in the nonprofit sector: student debt. In the United States, student debt is at an all-time high, hitting $ 1.6 trillion this year.

The 2020 TIAA Nonprofit Student Debt Survey found that student loans cause at least some stress for over 61% of those who carry them. In fact, 75% say they associate negative feelings with their loans, including 41% who feel frustrated, 34% who feel hopeless, 26% who feel angry and 22% who are ashamed.

The burden of repaying student loans can negatively impact other areas of financial management. Paying off a student loan can be a financial barrier for many people, and even under normal circumstances, borrowers may find it difficult to consider saving for retirement. A large majority of U.S. adults (84%) who currently pay off student loans say student loans negatively impact how much they can save for retirement, according to a 2019 survey by MIT AgeLab and the TIAA. In TIAA’s recent Financial Resilience Survey, 40% of employees aged 25 to 39 say they want education, tools or advice to help manage student debt.

In response, TIAA has partnered with social impact startup Savi to make it easier for nonprofit client institutions to offer meaningful student debt relief services to their employees. TIAA and Savi piloted the solution from July 2019 to March 2020 with seven nonprofits, four in higher education and three in healthcare. During that time, employees who signed up for the solution were on track to save an average of $ 1,700 per year in student debt repayments. Payments for some employees have been cut in half. Additionally, employees had an expected average discount of over $ 50,000 after successfully completing 120 months in the PSLF program.

Student debt management programs also boost employee retention. The 2020 TIAA Nonprofit Student Debt Survey also found that tools like Savi improve retention, positivity, and loyalty with employers. If Savi were offered by their employer, 82% would feel more positive about their employer. Additionally, 78% say it would impact their likelihood of continuing to work for their current employer for the foreseeable future.

As we all go through the impact of COVID-19 on the U.S. economy, putting the financial well-being of employees first is critical. Student debt is still a priority for employers, but COVID-19 has created an environment that highlights the growing number of financial burdens on employees. As student debt continues to be a major distraction for employees, providing a tool to help ease the burden can inspire them to stay longer or increase their productivity.

There has never been a more important time to provide employees with the resources they need to manage student debt while supporting their retirement planning. By offering a hard-hitting student loan and other financial wellness tools, employers can begin to improve the overall financial well-being of their employees.


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CMBS Debt Relief Requests Decline, But Expected to Rebound in May

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After facing a tsunami requests for relief in the first half of April, loan officers saw a drop in inquiries in the last two weeks of the month. But it probably won’t last.

During the two-week period ending April 26, the four largest major commercial mortgage-backed securities services (Wells Fargo, Midland, Keybank and Berkadia) received a total of 1,301 inquiries, or less than half of the 2,824 total in the previous two-week period, according to a new report from Fitch Ratings. The total amount of affected loans declined only slightly, from $ 51.5 billion to $ 48.5 billion.

“This is not a positive indicator, but probably the calm before the storm as larger delinquencies and more requests for relief arrive in May,” Adam Fox, senior director of Fitch US CMBS, said in a statement.

The drop in inquiries appears to be due to the “month-end schedule and collection of rents and debt service payment in April,” the report said, noting that agents expect more defaults. this month.

In the multi-family sector, for example, early predictions of a massive drop in rents turned out to be exaggerated because 89 percent of tenants made payments in April – although many landlords expect May to be worse.

During the same period as the queries decline, however, the number of loans transferred to special services fell from 113 to 218, or $ 8.4 billion from $ 5.7 billion. However, the report notes that not all of these loans are necessarily in default. In May, Fitch “expects special service transfers to increase as defaults increase and more complex changes are needed.”

Almost 26% of all CMBS borrowers have contacted their services since Fitch began collecting data on the pandemic, the report notes. In the meantime, 3% have been transferred to a special service.


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Euromoney debt relief for Africa as the Covid-19 coronavirus crisis escalates

The IMF is working to reduce debt in order to free up fiscal space for the poorest countries in Africa to fight against Covid-19, as finance ministers say, full waiver of all public and private sector debt is essential.

The call comes as G20 leaders hold an emergency video summit on Thursday to discuss their response to the coronavirus.

Africa needs $ 100 billion in additional emergency resources to fight coronavirus and calls on IMF, World Bank and European Central Bank (ECB) to provide aid to quit to some $ 44 billion in debt service payments for 2020.

African finance ministers called on international donors to make $ 100 billion in resources available through a coordinated response to fight the virus in an open letter to the heads of the three multilateral development banks (MDBs) after a virtual conference facilitated by the United Nations Economic Commission for Africa (UNECA).

A more appropriate collective response led by G20 countries and international financial institutions would call for a temporary moratorium on debt service payments for all developing countries to all creditors – Senior Executive, Development Bank

Calling on the MDBs to lead the financing effort, ministers also called for the immediate waiver of interest payments on all public sector debt, estimated at $ 44 billion for 2020.


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New York Taxi Workers Alliance blows up city’s $ 65 million taxi assistance fund for locket owners

The mayor’s fund is “a gift to lenders”, Bhairavi Desai, executive director of the taxi workers union, said in a statement tweeted by the organization. “It’s a cash bailout for lenders while drivers are left behind in debts, foreclosures and bankruptcy.”

The average medallion award reached $ 1.1 million in 2014.

Christopher Lynn, former chairman of the Taxi and Limousine Commission, also spoke out against the mayor’s agenda, saying relief money was not enough and bankruptcy protection was needed for residents. owners of medallions.

“I challenge anyone who has put forward this proposal to demonstrate how it will improve the financial situation of medallion owners,” said Lynn. “Loans for people who can’t repay the loans they already have – even though they’re interest-free – are really getting us nowhere. It does not matter. “

The mayor insisted in Tuesday’s briefing that a much larger relief program was not feasible and that the new program would be a step in the right direction.

“We have seen different bailout proposals. Some that would cost hundreds of millions, others that even went up to over a billion “, of Blasio mentionned. “This is not possible for New York City … but here is a way to greatly improve the situation.”

TLC Commissioner Aloysee Heredia Jarmoszuk said at the briefing that his office will continue to offer financial advice to locket owners and help them get additional loan relief from the federal paycheck protection program.

“The demand for taxi rides is already starting to increase with the reopening of our city’s economy”, Jarmoszuk mentionned. “We need the taxi industry to be healthy and ready to put more taxis on the road to meet this demand. This is how the industry will truly recover.

the New York Taxi Workers Alliance called on the state to intervene, tweeting that the fund “is a blatant abuse of the senator’s goodwill [Chuck Schumer] and members of Congress who put the money in the hands of the mayor. “

The Taxi Workers Union has come out in favor of a taxi medallion relief bill sponsored by State Senator Jessica Ramos, a Democrat from Queens.

Lizeth Beltran contributed to this report.


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Somalia’s giant economic progress secures $ 1.4 billion debt cancellation

The Paris Club of creditor countries agreed to restructure Somalia’s external public debt with immediate cancellation of US $ 1.4 billion.

Somalia has pushed for the cancellation of its inflated debt, some of which dates back more than four decades, when the country was battling the Siad Barre regime, which was toppled in 1991.

The deal between Somalia and the Paris Club creditor countries was reached on Tuesday evening under “Cologne terms”, as part of an initiative to provide interim debt relief to heavily indebted poor countries.

Somali Finance Minister Abdirahman Beileh hailed the debt cancellation and pledged to continue economic reforms to help rebuild the country.

Ultimately, debt relief will help Somalia reduce its external debt to $ 557 million in net present value, from $ 5.2 billion at the end of 2018, the IMF and the World Bank said.

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Moody’s warns of rising South Africa debt above 100%

South Africa’s government debt could rise by 40 percentage points over the next three years, as strong and widespread fiscal pressures and still weak economic growth weigh on the country’s credit profile, according to Moody’s Investors Service.

This would push government debt as a percentage of gross domestic product well above 100% and well above the peak of 87.4% that the Treasury is forecasting for 2023-24 under its active management scenario.

The increase in spending driven by a 500 billion rand ($ 29.6 billion) stimulus package to support the economy against the impact of the coronavirus pandemic will widen the budget deficit to 15.6% of GDP and debt will increase to 89.9% this fiscal year, Moody’s analysts led by Paris-based Lucie Villa said in a credit advisory released Thursday.

This is despite the government’s efforts to finance the package by redefining the spending priority and compares to the Treasury projection of 81.8%.

Africa’s most industrialized economy will shrink 6.5% this year due to the virus and strict lockdowns that halted almost all economic activity for five weeks from March 27, Moody’s said.

This compares to its previous forecast of a 2.5% contraction and the government’s projection of a 7.2% drop in production.

There is also a risk of “further tax leaks” from state-owned enterprises, as the virus restricts activity.

Falling demand for electricity will reduce cash flow and increase Eskom Holdings SOC Ltd’s financing needs, Moody’s said.

South Africa lost its last investment grade assessment on March 27, when Moody’s lowered its foreign currency and local currency debt to Ba1.

The negative outlook for the valuation means that “a rating hike is unlikely in the near future,” the rating company said in Thursday’s report.


Lily: Big South African Banks Consider Additional Debt Relief Options For Homeowners

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New Small Business Reorganization Law Could Make Bankruptcy Relief Easier For Many Small Businesses Affected By COVID-19 | Snell & Wilmer

By chance, on February 19, 2020, shortly after the confirmation of the first case of the COVID-19 virus (the “Virus”) in the United States, the Small Business Reorganization Act (“SBRA”) became available as debt. . relief for small businesses. The aim of the SBRA is to reduce the high costs of reorganization proceedings for small business debtors, to improve the prospects for success of these businesses and to simplify the process.

The SBRA was not enacted in response to the expected severe economic impact of the virus, but its availability is timely as a form of debt relief for small businesses affected by the virus. Indeed, the National Bankruptcy Conference recently sent a letter to Congress calling for an increase in the eligibility threshold for debt under the SBRA to $ 7.5 million or more to help more businesses suffering from economic side effects. “social distancing”, mandatory closures and on-site shelters. orders. Currently, a “small business debtor” eligible to file under the new SBRA limits is a debtor with total debts of $ 2,725,625 or less (see 11 USC § 101 (51D)) .

The SBRA adds a new subchapter V to chapter 11. Notably, the SBRA removes some traditional obstacles to confirming a reorganization plan under the Bankruptcy Code, such as (1) the top priority rule (i.e. (ie, creditors must be paid before shareholders retain ownership rights) and (2) the requirement that a deficient acceptance category must vote in favor of the scheme. These changes, among others, allow a faster, easier and more profitable path to confirmation of a plan and, in turn, to the successful reorganization and rehabilitation of a struggling business. The bankruptcy court has yet to determine that the plan does not unfairly discriminate and is fair to creditors, but these tests are easier to meet for a debtor.

Three other new debtor-friendly changes are important: First, an expensive disclosure statement is not required as part of the plan confirmation process. Second, only the debtor can file a plan. Third, an unsecured creditors committee can only be appointed by court order. These three changes are expected to reduce the time and cost of the reorganization process while providing more control for the small business debtor.

Finally, under the SBRA, a trustee is appointed to oversee the case and help the debtor negotiate the terms of the plan with the creditors.

The current health crisis is causing an economic downturn and putting incredible stress on small businesses. SBRA is a timely drug to help struggling businesses in these uncertain and difficult times.

Footnotes :

  1. “First case of novel coronavirus 2019 in United States,” The New England Journal of Medicine, March 5, 2020 https://www.nejm.org/doi/full/10.1056/NEJMoa2001191 (first case confirmed on January 20, 2020).
  2. See legislative history “HR 3311, the“ Small Business Reorganization Act, 2019 ”. The SBRA requires that at least fifty percent of a small business debtor’s debt arises from commercial or commercial activities. Current section 101 (51D) defines a “small business debtor” as one who has comprehensive, unconditional, liquidated, secured and unsecured debts of $ 2,725,625 or less.
  3. “Bankruptcy Professionals Want Expanded Protections to Reduce Coronavirus Impact,” The Wall Street Journal, March 23, 2020, https://www.wsj.com/articles/bankruptcy-pros-want-protections-broadened- to-blunt-coronavirus- impact-11584978603.
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Purdue alumnus receives AASV student debt relief scholarship

Friday, March 5, 2021

In 2021, the American Association of Swine Veterinarians (AASV) Foundation increased the number of scholarships for student debt relief, awarding three $ 5,000 scholarships to pork practitioners at the start of the year. career, including a former Purdue student, Dr Daniel Gascho (PU DVM 2017). The scholarships were awarded through the Dr Conrad and Judy Schmidt Family Student Debt Relief Endowment, which was renamed in honor of the donors who created the scholarship program.

The purpose of the scholarship program is to help alleviate student debt for recent veterinary graduates engaged in swine practice who still have a heavy debt burden. Qualified applicants must have practiced in private practice with at least 50% of their time devoted to pigs, providing on-farm services directly to independent pork producers.

Dr Gascho is the best veterinarian associated with Four-star veterinary service, LLC, Swine Health Care, Indiana. Its customers range from pot-bellied and show pigs to large commercial herds. It almost exclusively serves a private and family agricultural clientele. Taking advantage of the many events and opportunities offered to students during the AASV’s annual meetings, Dr. Gascho has established lasting relationships on which he continues to count.

The scholarship recipients were announced on February 28 during the 52nd edition of the AASVsd annual meeting, held virtually. The other two recipients are Dr. Claire LeFevre, alumnus of the School of Veterinary Medicine at the University of Wisconsin-Madison, and Dr. Henry Johnson, a graduate of the University of Illinois. All three recipients graduated from DVM in 2017 and have been continuing members of AASV since joining when they were students. As students, all have attended the AASV annual meeting on several occasions.

The scholarship program was launched with a generous contribution of $ 110,000 to the AASV Foundation by the Conrad Schmidt and Family Endowment. AASV founding member Dr Schmidt explained: “Together Judy and I have noticed that many new DVM graduates interested in swine medicine start their working lives with heavy student debt. As a long-time AASV member and supporter of the animal industry, our desire was to help AASV members who have devoted their professional skills to the health and production of pig herds. We hope this endowment will increase over time to help reduce the educational debt of AASV members as they begin their professional journey.

Writers):
Kevin Doerr | pvmnews@purdue.edu

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