Cancel developing country debt by using IMF gold reserves, say campaigners

By agency reporter
October 13, 2020

The profit from selling less than seven per cent of the IMF’s gold would be sufficient to cancel all debt payments by the poorest countries in the world to the IMF and World Bank for the next 15 months. This would be less than the gain in value of the IMF’s gold since the Covid crisis began.

The figures are included in a new briefing from Jubilee Debt Campaign, How the IMF can unlock multilateral debt cancellation. The briefing outlines how the IMF’s huge resources could be used to fund urgently needed multilateral debt payment cancellation. Since the start of 2020, the IMF’s gold reserves have increased in value by $38 billion. The profit from selling $11.8 billion of gold would be enough to pay for cancelling all debt payments by the 73 countries eligible for the G20 Debt Service Suspension Initiative for the next 15 months. This would still leave the IMF with $26 billion more gold than the institution held at the start of 2020.

As well as using profit from gold sales, Jubilee Debt Campaign propose that less than nine per cent of the resources rich countries would receive from a Special Drawing Rights issuance would be needed to cancel all multilateral debt payments by the poorest countries, between now and the end of 2024. A Special Drawing Rights issuance is a way to create reserve assets which was last used by the IMF during the 2008/09 financial crisis. Cancelling all debt payments by the poorest countries to multilateral institutions, including the IMF and World Bank, would save those countries $70 billion between now and end-2024.

Jubilee Debt Campaign argues that multilateral debt payment cancellation is needed to help countries cope with the impact of the coronavirus economic and health crisis, and could be used to leverage private and bilateral debt cancellation, generating savings for developing countries of $180 billion over the next four years.

Sarah-Jayne Clifton, Director of Jubilee Debt Campaign, said: “There is enormous inequality in the resources available to countries to help them weather the Covid crisis. Poorer countries simply don’t have the monetary and other tools available to them that rich countries are using to keep their economies afloat. The IMF has the tools and resources to help plug this gap. It has the ability now to unlock a comprehensive debt payment cancellation scheme that could save the poorest countries $180 billion in debt payments over the next four years. This would have a huge impact, helping poorer countries tackle the current economic and health crisis and supporting their faster economic recovery in years to come.”

Jubilee Debt Campaign argues that a comprehensive debt payment cancellation scheme would leave governments more able to borrow at low interest rates in the future, because they would have a lower debt burden. Research by the IMF and a private ratings agency has shown that the failure to cancel debts leaves highly–indebted countries trapped with high debt burdens and so only able to borrow at punitively high interest rates.

* Read How the IMF can unlock multilateral debt cancellation here

* Jubilee Debt Campaign https://jubileedebt.org.uk/


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