$11 billion of IMF loans are bailing out private lenders

  • New research from Jubilee Debt Campaign shows how IMF loans to 28 highly indebted countries are enabling debt repayments to private lenders during the Covid-19 crisis
  • The figures are released ahead of the G20 Finance Ministers meeting which will discuss the failure of private lenders to take part in the G20 Debt Service Suspension Initiative

$11.3 billion of IMF loans issued to help countries heavily impacted by  the coronavirus crisis are effectively being used to bail out private lenders, according to new research released today by Jubilee Debt Campaign. The loans to 28 highly indebted developing countries are enabling interest and debts to private creditors to keep being paid.

Of the 77 countries the IMF has agreed loans for since the crisis began, Jubilee Debt Campaign has identified 28 countries which are highly-indebted on the IMF’s own metrics, and which are making payments to private lenders. According to its own rules, the IMF should not lend to countries with unsustainable debts unless there is a debt restructuring, so that its resources are not used to bail out previous lenders.

Tim Jones, Head of Policy at Jubilee Debt Campaign, said:

“Countries urgently need more money to tackle the health and economic crises caused by Covid-19. But unless there are debt restructurings, IMF loans to highly indebted countries just pay off private lenders, while not providing any new money for the country concerned. Public money should be being used for public benefit, in this case helping governments to tackle a major global pandemic, not private profit.

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

Bernard Anaba, Policy Analyst at the Integrated Social Development Centre in Ghana said:

“It makes no sense for the IMF to lend more money to Ghana just to enable high interest payments to private lenders to keep being made. Currently, the Ghanaian people are facing huge health and economic challenges caused by coronavirus, but we are trapped in the chains of debt. We need IMF help to reduce debt payments to private lenders.”

The IMF has a policy of only lending to governments with unsustainable external debts if a debt restructuring takes place during the IMF programme. IMF research in 2019 found that IMF loan programmes in high debt countries were far more successful if a debt restructuring took place as part of the programme.

The IMF has also argued that “debt restructurings have often been too little and too late, thus failing to re-establish debt sustainability and market access in a durable way”. However, the Jubilee Debt Campaign research argues that the IMF is partly to blame for this as it often breaks its own policy by lending to countries with high debts, thereby delaying necessary debt restructurings.

G20 Finance Ministers will meet on 18-19 July, including to discuss implementation of their Debt Service Suspension Initiative, agreed in April 2020. Under the initiative, up-to 73 countries can request a suspension of debt payments to other governments for May to December 2020. The G20 also called on private lenders to “participate in the initiative on comparable terms”, but none have yet done so.

The IMF has criticised the failure of private lenders to take part in the suspension. On 9 June, Kristalina Georgieva criticised the lack of debt suspension from the private sector and said the failure to provide debt relief and restructuring “would lead to inevitably a much worse option, which is disorderly defaults.”

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