Low-income countries need their debts for 2020 forgiven, alongside billions in emergency grants to survive the Covid-19 crisis, civil society groups around the world have said, arguing the viral pandemic will hit hardest the poorest people in the poorest countries.

More than 100 civil society organisations internationally have called on creditor nations to permanently cancel all debt repayments as the “fastest way to keep money in countries and free up resources to tackle the urgent health, social and economic crises resulting from the Covid-19 global pandemic”.

And a group of Australian civil society organisations has called on the Australian government to use its influence at the G20 and IMF to push for the permanent cancellation of all debt due from vulnerable countries in 2020, without interest accrual, charges or penalties.

Dr Luke Fletcher, executive director of Jubilee Australia, said Australia, as a G20 nation, a member of the Paris Club of creditor nations, and an influential voice at the IMF and World Bank, should use its influence to push for the debt cancellation at the IMF and World Bank spring meetings this week.

“Many of our Pacific neighbours, who are already bearing the brunt of the impacts of climate change, are at risk of debt distress and will also be particularly vulnerable to the Covid-19 crisis,” Fletcher said.

Globally, the cancellation of debt repayments by low-income countries would free up an estimated US$25.5bn to fight coronavirus in 2020 alone. Extending that cancellation to payments due in 2021 would make another US$24.9bn immediately available to help counter the virus.

Coordinator of the Asian People’s Movement on Debt and Development, Lidy Nacpil, said hundreds of millions of people in the world’s most impoverished countries were facing devastating health, social and economic crises as a result of the Covid-19 pandemic that their governments were ill-equipped and under-resourced to counter.

“Permanently cancelling debt payments from these countries would be the fastest way to free up existing public resources to tackle this unprecedented crisis and to save lives,” Nacpil said.

In Australia, Jubilee Australia, Action Aid Australia, Caritas Australia, Oxfam Australia, AID/WATCH, Union Aid Abroad-APHEDA, the Australian Fair Trade and Investment Network, and the International Women’s Development Agency have written to treasurer Josh Frydenberg urging him to support debt cancellation, arguing that the Covid-19 pandemic will disproportionately affect the most vulnerable people in the most vulnerable countries.

“The Covid-19 virus brings with it both a health and an economic crisis. Without swift action now to bolster fragile and overstretched health systems and testing in low-income countries, there are grave risks of further spread of the virus,” the letter says.

“Whilst the impacts will be felt by all of us, it is the most vulnerable and marginalised in low-income-countries, including women and girls, who will be hardest hit.”

Australia should also support the provision of new emergency finance, given as grants not loans to vulnerable countries, so as to avoid creating even more debt for the future; and the establishment of a UN-led permanent mechanism to resolve future debt crises, a public statement from the group argues.

Australian prime minister Scott Morrison told a virtual G20 summit last week that Australia’s “Pacific family” must be a focus of international support, and said the government was “reconfiguring our development assistance to ensure critical health services can continue to function and to help our Pacific neighbours and Timor-Leste to manage the immediate economic impacts of the pandemic”.

Alex Hawke, the minister for international development and the Pacific, said Australia’s high commissions and embassies across the region remain open, and the government was working with Pacific governments to “mitigate the economic shock” beyond the immediate health crisis. The World Bank and IMF have already indicated a preparedness to suspend or forgive debt. Last month in a joint statement, they called for all bilateral creditors to suspend debt repayments from low-income countries that request forbearance.

“The coronavirus outbreak is likely to have severe economic and social consequences for International Development Assistance countries, home to a quarter of the world’s population and two-thirds of the world’s population living in extreme poverty,” the statement said.

The authors of a report by the Harvard Kennedy School of Policy Analysis for the US State Department on Chinese “deptbook diplomacy” have warned that the global economic devastation wrought by the coronavirus pandemic could give China the ability take control of indebted nations’ assets at an accelerated rate, or boost its soft power, by forgiving debt.

“Whatever debt leverage China had over countries is going to increase,” the report’s co-author, Sam Parker said. “Whatever bad consequences were going to happen as a result of being unable to repay China, I think the timeline could be severely accelerated.”

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