EU contributes €183 million to debt relief for 29 of the world's poorest and most vulnerable countries

The EU will contribute €183 million to the IMF’s Catastrophe Containment and Relief Trust for debt relief in 29 low-income countries, allowing them to increase their social, health, and economic spending in response to the COVID-19 crisis.

This contribution, announced just after the G20 Summit endorsed a Common Framework on Debt Treatments beyond Debt Service Suspension Initiative (DSSI), is fully in line with Commission President von der Leyen’s proposal for a Global Recovery Initiative that links investments and debt relief to the Sustainable Development Goals.

Paolo Gentiloni, Commissioner for Economy, added: “Today, Europe makes an important contribution to multilateralism and debt relief. The EU as a member of the G20 strongly supports the Debt Service Suspension Initiative and the new Common Framework on Debt Treatment. This contribution to the IMF debt relief trust is a further demonstration of our firm commitment to helping low-income countries deal with their debt burden.”

The European Commission is determined to continue supporting its partner countries in maintaining their path toward the SDGs despite dire financial situations. Debt levels were already high before the crisis and in many countries, they are now simply becoming unsustainable. This is why the EU has decided to contribute €183 million for debt relief through this IMF mechanism.

“I am very thankful to the EU for the generous contribution of €183 million to the CCRT—a critical step to help the world’s most vulnerable countries provide health care and economic support for their people during the ongoing pandemic. The EU and the IMF have a strong partnership on development financing. I urge others to join the EU and our other contributors in giving to the CCRT. Contributions from our member countries are instrumental in helping the Fund support the most vulnerable countries,” said Kristalina Georgieva, IMF Managing Director.

The EU is leading the way on international partnerships

The EU funds channelled through the IMF’s Catastrophe Containment and Relief Trust (CCRT) will provide debt service relief to 29 of the world’s poorest and most vulnerable countries.

The CCRT pays debts owed to the IMF for eligible low-income member countries that are hit by the most catastrophic natural disasters or battling public health disasters—such as epidemics or global pandemics. This allows them to free up resources to meet the exceptional balance of payments needs created by the disaster rather than having to assign those resources to debt service.

Experience from the first two six-month tranches of CCRT relief showed that benefitting countries were able to boost their projected 2020 priority spending by some 1.2 percentage points of GDP; with expenditure on health and social protection increasing, on average, by about a 0.5 percentage point.

Another positive benefit from this short-term liquidity support is that it will also contribute to the countries’ macro-economic stability.

With this €183 million contribution, the EU becomes the largest donor to the CCRT, which so far has received over $500 million in grants from donor countries.

Original source: European Commission