• Campaigners call for debt relief not more loans as WHO admits off-track in bringing the disease under control
• Over two weeks have passed since G20 $300 million pledge but still no agreement on how it will be delivered
Debt campaigners are calling for the IMF to provide $300 million of emergency Ebola financing promised by G20 leaders earlier this month in the form of debt relief, not loans, as it emerged that the details of implementing the pledge are still being discussed at the IMF.
UK coalition Jubilee Debt Campaign are warning that using loans will leave a lasting legacy of debt that will undermine future investments and improvements in public health systems and other essential services. The urgent need for assistance was underlined by the World Health Organisation admitting yesterday that it was off-track in bringing the disease under control in Liberia and Sierra Leone.
At the G20 summit on 15 November world leaders welcomed “the IMF’s initiative to make available a further $300 million to stem the Ebola outbreak and ease pressures on Guinea, Liberia and Sierra Leone, through a combination of concessional loans, debt relief, and grants.”
However, it has now emerged that the detail of the IMF initiative has yet to be agreed, with debates over how much of the pledge will be met through loans, debt relief and grants now underway.
Guinea, Liberia and Sierra Leone are already spending $100 million between them on debt payments this year, with payments expected to rise to $130 million in 2015, of which roughly a quarter is to the IMF. The IMF has lent an additional $128 million to the three countries since the outbreak began, and is now considering lending more.
Campaigners are arguing for the additional financing to come in the form of debt cancellation and grants, pointing to the significant untapped IMF sources available. These include the $150 million of unspent money in the IMF’s post-Catastrophe Debt Relief Trust, established following Haiti’s devastating 2010 earthquake, and the IMF’s $8.8 billion of profit since 2011 that is sitting unspent in its reserves.
Sarah-Jayne Clifton, Director of Jubilee Debt Campaign said:
“There is a big difference between cancelling a debt and creating a new one. We welcome the commitment by the G20 to ensure that the IMF cancels debts as part of the response to Ebola. The IMF is awash with money. It can afford to meet the G20’s $300 million pledge without adding to the already significant debt burden on the countries worst affected by the crisis. Health systems in west Africa have been undermined by the weight of IMF debt and conditions in the past. Now is not the time to repeat those mistakes.”
The IMF has estimated that the governments of Guinea, Liberia and Sierra Leone will be $600 million worse-off because of the impact of Ebola.
Sarah-Jayne Clifton continued:
“Other lenders such as the World Bank also need to cancel debts in response to the Ebola outbreak. It is alarming that at the same time as health systems are at breaking point, millions of dollars continue to flood out of these countries in debt payments.”
Collectively, Guinea, Liberia and Sierra Leone owe $464 million to the IMF, out of a total debt of $3,600 million. In total, the three countries are spending $100 million in debt payments in 2014, rising to $130 million in 2015. Debt payments to the IMF have been $14 million in 2014, and will be $21 million in 2015 and $26 million in 2016.
Since the Ebola crisis began, the IMF has disbursed $128 million of new loans to the countries (which is included in the debt figure above of $464 million). Any loans which make up the meeting of the $300 million pledge will be additional to this.
The US has called for the debt relief to be paid for out of the post-Catastrophe Debt Relief Trust within the IMF. This Trust was setup following the Haiti earthquake in 2010. It allows for debt relief in low income countries if a disaster:
• Affects more than one-third of the population of the country, and:
• Destroys more than one-quarter of a country’s productive capacity, or causes damage exceeding 100 per cent of GDP
It is unclear in the case of Ebola if the second of these has been met, so it may be that a new criterion needs to be adopted by the IMF Board. Upon meeting these criteria, a country has all debt payments coming due over the next two years cancelled. In ‘exceptional’ circumstances, where a country has a high debt and perceived ongoing balance of payments problems, further cancellation of debt stock into the future can be allowed. If all the three countries get is two years of debt service relief, this will mean a total amount of debt and interest cancelled of $47 million.
The post-Catastrophe Debt Relief Trust currently has SDR102 million ($150 million) within it. The IMF has made $8.8 billion of profit from its lending and investments over the last three years, which have been added to the general reserves of the institution.
Payments coming due to the IMF, 2014 to 2018, US$ million