IMF refuses debt relief for Nepal
International Monetary Fund (IMF) has refused debt relief for Nepal as it has not met all the criterion for the debt relief.
IMF spokesperson Gerry Rice today said that Nepal will not receive debt relief from a special IMF trust fund that helps poor countries when they face natural disasters.
But the IMF Catastrophe Containment and Relief Trust cancelled nearly $100 million in debt owed by Ebola-impacted West African nations.
Jubilee USA Network – a religious development organization – has advocated for the trust fund and debt relief for West Africa and Nepal as April 25 devastating earthquake has killed more than 8,600 people and destroyed over 500,000 homes.
“This is a troubling news,” a United Nations debt expert and executive director of Jubilee USA Network Eric LeCompte, said, adding, “Given the devastation in Nepal, it’s hard to believe that the criteria was not met.”
Some of the international institutions though claimed that Nepal is one of 38 low-income countries eligible for relief from the new fund, Nepal was not yet eligible, according to the IMF and World Bank statdards. Despite the lobbying for debt relief for Nepal, the country still has fiscal space and not backrupt, which means Nepal can not get debt relief.
An eligible country must meet certain criterion to qualify for that relief after a natural disaster. The disaster must impact at least one-third of the country’s population and either destroy 25 per cent of the nation’s productive capacity or cause damage equal to the size of the country’s economy.
According to Rice, Nepal met the first condition but the earthquake did not cause enough total economic damage. The devastating earthquake of 7.8 magnitude on April 25 and subsequent aftershocks caused $5 billion to $10 billion in damage, about one-third of the country’s total economy. However, Rice did not comment on whether or not Nepal’s productive capacity was affected to trigger debt relief under the trust.
“The fund was created for situations just like this,” LeCompte said, adding that debt relief, in Nepal, could make a significant difference. “Beyond IMF, World Bank and Asian Development Bank, who hold about $3 billion of Nepal’s debt have unfortunately not announced any debt relief plans yet.”
Nepal owes $3.8 billion in debt to foreign lenders, including $54 million to IMF and approximately $3 billion to World Bank and Asian Development Bank. According to the recent World Bank data, Nepal paid $217 million in debt in 2013, approximately $600,000 in average daily debt payments, or more than $35 million since the earthquake.
Yesterday, Nepal hosted a International Conference for Nepal’s Reconstruction, 2015 (ICNR 2015) that witnessed a pledge of $4.4 billion – more than half of the Post-Disaster Needs Assessment (PDNA) estimation of $6.7 billion for post-earthquake reconstruction – from development partners.