Dozens of heavily indebted poor countries around the world were already teetering on the edge of economic catastrophe before the coronavirus pandemic struck early this year. Many were facing staggering foreign debt payments that ate up as much as 40% or more of their governments’ annual revenues.
As the world economy slides into an abyss because of COVID-19, those payments could quickly become even more burdensome, making it impossible for many fragile economies to adequately respond to the crisis while meeting their financial obligations.
In the months since the pandemic began, international lenders have taken steps to reduce or postpone debt payments for many poor countries in the near term in order to free up funds for the medical resources that will be needed to fight the virus that so far has infected more than 3 million people and killed nearly 217,000 worldwide.
But debt relief advocates argue that the concessions are insufficient, and in some cases, could leave poor countries in even worse financial condition when the pandemic finally subsides by sharply increasing their debt service in the future and creating further instability.
The situation has given new urgency to calls from activist groups to reduce — or outright cancel — the payments the world’s poorest countries owe their creditors.
“This pandemic is an unprecedented shock that requires unprecedented responses,” said Tim Jones, head of policy for the Jubilee Debt Campaign, a London-based organization that advocates the cancellation of debt owed by developing countries.
“We are calling for a mechanism to reduce the debts across the board to make the debt sustainable,” he said.
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Warnings from relief agencies suggest that the consequences of the spreading virus could be particularly dire for countries dealing with war, internal conflict or political instability. A new analysis from the International Rescue Committee found that before the pandemic has run its course, between 500 million and 1 billion people could be infected in dozens of “conflict-affected and fragile countries,” resulting in between 1.7 million and 3.2 million deaths.
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