Last week saw a divided world on the issue of debt.
On October 12 to 18, the International Monetary Fund (IMF) and the World Bank (WB) gathered the world’s finance officials and central bankers in their annual Joint Conference, held online for the first time. The main agenda: how to address the world’s health and economic crises through new loans, new financing mechanisms and new programs to ease the debt servicing burden of borrowing countries.
With the world reeling from the impacts of the Covid-19 pandemic, it has become increasingly clear that the assumption that the crisis can be dealt with using the usual set of orthodox tools is exceedingly flawed. Recognizing the extraordinary nature of the global crisis, even the World Bank and the International Monetary Fund (IMF) who recently announced that they would cancel $215M debts owed to them by 25 countries that were facing a "moderate or high risk of debt distress" – for countries with a GDP per person that is below $1,145 a year.
The International Monetary Fund issued its verdict on the Covid-19-stricken global economy: worst downturn since the Great Depression of the 1920s. Gita Gopinath, Chief IMF Economist, projected a growth rate of minus 3 for the world economy, a minus 6 for the developed countries, and a minus 1 for emerging and developing countries for the entire year of 2020 ("The Great Lockdown," IMF Blog, April 14, 2020). The Philippines, one of the countries waiting for the Covid-19 infection curve to fall and flatten, belongs to the last category; it is also one of the worst hit in Asia.