Nigeria and Pakistan are among the countries to get debt relief from China and the G20.
China and the G20 agreed to grant debt relief to the world’s poorest countries classified under the International Development Association (IDA).
The decision was revealed at the ongoing 2020 virtual spring meeting of the World Bank and the International Monetary Fund (IMF).
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The President of the World Bank, David Malpass said there would be debt relief from the beginning of May 2020.
“IDA countries will have bilateral debt relief beginning May 1. That way, they can concentrate their resources on fighting the pandemic and its economic and social consequences.
“I take note that in the G-20 meetings, China is supporting the international agreement to allowing moratorium of debt repayments by IDA countries if they ask for forbearance.
“That’s very important because China is one of the biggest creditors and their participation in that effort is important and was very welcome.” He said.
Countries classified under the IDA are countries that have a per capita income below a specified threshold. Countries under this classification for 2020 have a per capita income below $1,175.
Nigeria and Pakistan quality for the debt relief based on present per capita income levels. They are also regarded as credit worthy and can do some IBRD borrowing.
The World Bank president said further that a system would be put in place to monitor how beneficiaries of the debt relief would utilise the extra funds.
“So if the government saves money by not paying creditors, there is an expectation that they use it for health, education, economic rebuilding, jobs and concrete ways to help the people of their country,” he said.
“There is also within the debt relief initiative, the idea that there will be monitoring and assessment of the debt sustainability of poor countries.
“That process itself will amount to transparency. That’s going to change the way that countries have been lending into the developing world and it will improve it substantially and there will be a big benefit even to the creditors.
“It’s not the best system for creditors to be making non-transparent loans into poor countries and this is going to improve the system.”
He said further that developing countries will get more grants and concensional loans.
Former President Olusegun Obasanjo as well as World Bank Director, Okonjo Iweala had campaigned for debt relief for African countries so that they can confront the Coronavirus pandemic.