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FAIRFIELD, Connecticut (April 14, 2020) – The world’s 75 poorest countries are expected to pay $ 60 billion in debt to external creditors in 2020 – more than they should receive donor aid to fight COVID-19 . This burden will rob them of the financial resources they need to invest in tests, medical equipment, health workers and safety nets to fight the epidemic, and push millions more children into poverty, a today notified Save the Children.
In one open letter to the G20 finance ministers ahead of the spring IMF and World Bank meetings, the agency is urging that the $ 60 billion in debt repayment be converted into an investment fund to fight the coronavirus pandemic.
“Providing aid through the World Bank and other donors while allowing commercial debt payments to absorb much of the transfer would be the financial equivalent of pouring water into a bucket. with large holes, ”the letter says.
Without suspension of debt payments, governments in sub-Saharan Africa will spend more on debt than on health, the agency warns.
The letter also states: “The governments of these countries are now faced with a heinous choice. They can either pay off creditors or invest in the frontline health services, safety nets and economic stimulus measures needed to alleviate the pandemic, fight poverty and restore inclusive growth. They can’t do both. If debt takes precedence over people, children will be the first and hardest hit. “
Save the Children has welcomed proposals to suspend payments from official bilateral credits owed to governments, but urges the G20 to go further. Commercial creditors account for nearly half of the total repayments of the poorest countries – and the agency wants banks, commodity traders and sovereign bond holders to match public debt relief.
“It’s not just a question of financial management,” said Janti Soeripto, President and CEO of Save the Children. “At the end of the day, it’s about the lives of vulnerable people and the future of children. Failure to act decisively now could set the stage for a “lost decade” marked by rapid setbacks in efforts to reduce poverty, malnutrition and child mortality.
With the bite of the economic recession, countries across the developing world are battling a deadly mix of COVID-19 and rising poverty. Based on recent World Bank growth projections, Save the Children estimates that an additional 22 to 33 million children could fall into poverty in Africa alone over the next year.
Save the Children calls for the G20 spring meeting to agree on a framework for an immediate suspension of debt service for countries seeking support, including:
The Paris Club of creditors, Chinese state creditors and creditors of Arab institutions to suspend repayments of principal and interest with immediate effect;
Commercial creditors should apply similar conditions, with compliance encouraged by making eligibility for COVID-19 recovery funding conditional on participation;
Increased funding to support multilateral debt relief through IMF and World Bank.
“Debt relief is not only the right thing to do for vulnerable people in poor countries, it is the smart thing to do for all countries. The coronavirus does not respect borders. If we fail to support governments and communities in the poorest countries, we could open the door to a resurgence of COVID-19 in countries currently flattening the curve, and a financial burden for the poorest countries including it will take years to recover, ”said Soeripto.
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