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On 25 March 2020, the World Bank Group and the International Monetary Fund released a joint statement to the G20 requesting official bilateral creditors to suspend debt payments from International Development Association-eligible countries that request forbearance. The objective is to help with such countries' immediate liquidity needs to tackle challenges posed by the coronavirus outbreak and allow time for an assessment of the crisis impact and financing needs for each country. The World Bank and IMF have offered to make these assessments, including identifying countries with unsustainable debt burdens, and to develop proposals for comprehensive action by official bilateral creditors to address both the financing and debt relief needs of IDA countries. The World Bank and IMF are seeking endorsement for their proposal during the World Bank/IMF Spring meetings over 16-17 April 2020. A list of IDA-eligible countries can be found here.
The joint statement will no doubt be welcomed by governments in IDA-eligible countries who are facing the acute social, medical and economic challenges caused by the rapid global spread of COVID-19. However, before requesting the suggested forbearance from official bilateral creditors, countries considering doing so need to carefully consider the impact such request could have on their other financing agreements. In some cases financing contracts may contain contractual provisions that are breached by the country making such a request (or even expressing an intention to do so).
Whilst the primary consideration has to be the health and well-being of its citizens, we would recommend that countries seek legal advice before requesting any such forbearance so that any unintended or avoidable consequences in connection with other debt stock can be managed appropriately.
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