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Sri Lanka may be granted debt relief

(Photo Credit: World Bank)

Following Sri Lankan President Gotabaya Rajapaksa's call for debt relief, the World Bank and the International Monetary Fund (IMF) have called on bilateral creditors to suspend debts from International Development Association (IDA) countries, which may benefit Sri Lanka.

The Daily Mirror reports that Sri Lanka is likely to be eligible for bilateral debt relief as it has recently transitioned from an IDA status to an International Bank for Reconstruction and Development (IBRD) status, akin to Bolivia and Vietnam.  Although Sri Lanka formally transitioned in 2017, it is likely to be eligible for the support offered to IDA countries. IDA countries are impoverished countries with significantly low per capita incomes which prevents them from borrowing from the International Bank for Reconstruction and Development (IBRD).

In a joint statement to the G20, the World Bank and IMF stated;

“With immediate effect—and consistent with national laws of the creditor countries—the World Bank Group (WBG) and the International Monetary Fund (IMF) call on all official bilateral creditors to suspend debt payments from IDA countries that request forbearance […] This will help with IDA countries’ immediate liquidity needs to tackle challenges posed by the coronavirus outbreak and allow time for an assessment of the crisis impact and financing needs for each country,”

Al Jazeera reports that both the IMF and World Bank have launched emergency programmes to offer grants and loans to member states, which place a heavy focus on developing countries and markets. The World Bank is currently working with 35 countries to manage resources in response to this crisis and the World Bank is planning to spend $160bn over the next 15 months.

Sri Lanka's request for debt relief comes as the coronavirus has wreaked havoc on its economy, crippling its exports. Sri Lanka also has over 4.8 billion US dollars to repay this year.

 

Read more from Al Jazeera and the Daily Mirror.

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