Reaction to call by global banking body for debt payment suspension

The Institute of International Finance, a grouping of over 450 banks, hedge funds and other global financial firms, has called for a suspension of debt payments by the poorest countries to private creditors during the coronavirus crisis. However, they have said that any interest and principal payments should be paid in full in the future.

Reacting to the news, Tim Jones, Head of Policy at Jubilee Debt Campaign, said:

“It is welcome that private banks are calling for a suspension of debt payments by developing countries including to international private lenders and speculators. However, these payments need to be cancelled outright, not simply suspended. Suspensions just kick the can down the road, laying the ground for an even bigger debt crisis in the future.

“The scale of the crisis faced by developing countries requires the full cancellation of debt payments at least until the end of 2020, and for the banks to support legislation in the UK and New York to prevent poor countries being sued by vulture funds if they do suspend debt payments.”

Virtually all international debts are owed under UK or New York law, with 90% of African government international bonds owed under UK law.

The IIF sent a letter to the IMF and World Bank, which includes a request that there should be:

“Broader international and private creditor forbearance: Private creditors (and other international creditors including sovereign wealth funds) should commit, upon specific request by the sovereign debtor, to forbear payment default for the poorest and most vulnerable countries significantly affected by COVID-19 and related economic turbulence for a specified time period (e.g. for 6 months or to the end of 2020), without waiving the payment obligation.”

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