| 22 April 2024, Monday |

At Paris summit, World Bank unveils debt payment pause for disaster-hit countries

The World Bank chief announced a raft of measures on Thursday to aid countries hit by natural disasters, including a pause in debt repayments to the lender, at a gathering of world leaders in Paris to give impetus to a new global finance agenda.

Some 40 leaders, including about a dozen from Africa, China’s prime minister and Brazil’s president, were in the French capital alongside international organisations at the “Summit for a New Global Financial Pact”.

It aims to boost crisis financing for low-income countries, reform post-war financial systems and free up funds to tackle climate change by getting top-level consensus on how to promote a number of initiatives struggling in bodies like the G20, COP, IMF-World Bank and United Nations.

“It is clear that the international financial architecture has failed in its mission to provide a global safety net for developing countries,” United Nations Secretary General Antonio Guterres said, calling the system outdated, dysfunctional and unjust.

Leaders are set to back a push for multilateral development banks like the World Bank to put more capital at risk to boost lending, according to a draft summit statement seen by Reuters.

In remarks to a panel on Thursday, new World Bank president Ajay Banga outlined a “toolkit”, including offering a pause in debt repayments, giving countries flexibility to redirect funds for emergency response, providing new types of insurance to help development projects and helping governments build advance-emergency systems.

“We need a robust and predictable financial safety net,” Ethiopian Prime Minister Abiy Ahmed told the conference, calling for a boost to below-market financing and more grants.

“African countries are facing an unprecedented funding squeeze which have aggravated the vulnerabilities,” he said.

While the new World Bank measures are designed to give developing nations some breathing space, there was no discussion of multilateral lenders offering debt write-downs – so-called haircuts.

China – the world’s largest bilateral creditor – has been pushing for lenders like the World Bank or the International Monetary Fund to absorb some of the losses, which the institutions and rich countries oppose.

  • Reuters