The Jubilee Blog

The Fed and Central Banks Seek Cure for COVID-hit Economy

On August 27 and 28, the US Federal Reserve and other government central banks meet for their annual retreat. Traditionally held in the picturesque location of Jackson Hole, Wyoming, this year the meeting will take place virtually under the theme “Navigating the decade ahead: Implications for monetary policy.”

“Government banks are grappling with a global economy projected to worsen,” said Eric LeCompte, the Executive Director of Jubilee USA Network. “The meeting will give us a view of what role central bankers wish to play in the battle against the economic impacts of the coronavirus.”

The global economy is expected to contract by almost 5%. Emerging market and developing economies already held historically high levels of debt before the COVID-related crisis. Latin America is expected to contract about 10%.

These economic forecasts translate to United Nations projections that poverty will increase for the first time in 20 years. Ultimately, more than 130 million people will fall into extreme poverty during the next decade.

“The fate of the economy and global poverty levels are intertwined,” said LeCompte.

Battling Economic Crises, Tropical Storm Laura Slams Haiti and Dominican Republic

By Zachary Conti

Over the weekend, Tropical Storm Laura pummeled Haiti and the Dominican Republic leaving at least 13 dead, infrastructure decimated and towns isolated by landslides.

"The damage is quite serious across Haiti," stated Eric LeCompte, the Executive Director of the religious development group, Jubilee USA Network. "Already Haiti was reeling from the impacts of the coronavirus, high poverty and soaring debts."

Haiti struggles with more than $2 billion in debt as nearly 60% of its 10 million people live in poverty. Due to the health and economic impacts of COVID-19, the International Monetary Fund cancelled 6 months or $5.1 million of Haiti's debt in April. Haiti also received $111 million in concessional IMF loans to confront the coronavirus crisis. Haiti has not requested a pandemic debt payment suspension that it qualified for from G20 countries.

"Haiti is the poorest country in the Western Hemisphere and more than 90% of its people are highly vulnerable to natural disasters," shared LeCompte. "Haiti's wealthier neighbor on the island of Hispaniola, the Dominican Republic was also hit hard by Tropical Storm Laura as it struggles with the economic impacts of the coronavirus."

The Dominican Republic received $650 million this year in emergency COVID-19 financing from the IMF and counts its debt above $23 billion.

 

World Bank Says Bold Debt Relief Plans Needed to Confront COVID Crisis

World Bank President David Malpass called for debt cancellation for poor countries struggling with the coronavirus, in an interview he gave to The Guardian.

"The coronavirus crisis is both a health and economic crisis and many developing countries can't address the critical needs of their people while paying debts," noted Eric LeCompte the Executive Director of the religious development group, Jubilee USA and a United Nations debt expert. "Many countries are experiencing both dramatic losses in revenue and rising costs to address the impacts of this crisis."

Malpass asserted that new World Bank data would illustrate that 100 million people were pushed into poverty by the crisis. He explained the crisis was worse than the crisis of 2008 and that more bold policies were needed from the G7 and G20. The G20 offered debt payment suspension policies for the 73 poorest countries in April that could save poor countries $12 billion in 2020.

"The only way for many developing countries to get on the otherside of this crisis is to cancel debts," stated LeCompte who monitors World Bank policies. "The private sector needs to participate in debt relief plans and shouldn't expect taxpayers of developed countries to bail them out."

Malpass shared concerns of private sector actors and China's development bank refusing to participate in current debt relief plans. He argued that these groups could get a "free ride" and take the debt relief and aid being offered by the United States and other advanced economies.

G7 Calls for More Debt Relief to Confront COVID-19 Crisis

Treasury Secretary Steven Mnuchin convened G7 Finance Ministers, the International Monetary Fund and the World Bank to coordinate responses to the COVID-19 pandemic. In April, the G7 supported the G20 to implement a plan to suspend debt payments for the 73 poorest countries in the world through 2020.

"The G7 called on the G20 to consider suspending debt payments beyond 2020 and into next year for the world's poorest countries," stated Jubilee USA Executive Director and United Nations debt expert, Eric LeCompte. "Developing countries need more debt relief to fight the serious health and economic impacts of the coronavirus."

By year-end, the suspension of debt payments could free up $12 billion for low-income countries to invest in health services and economic recovery. The Finance Ministers encouraged all G20 countries to fully participate in the debt payment freeze.

"The G7 is pressuring China to fully implement the debt payment suspension and agree to extend the debt payment freeze into 2021," said LeCompte. "Unfortunately, the G7 took no action to extend debt relief to more developing countries."

When the debt payment suspension began, the private sector was encouraged to participate. However, much of the private sector resisted participation. In July, G20 Finance Ministers released a statement with stronger private sector participation language, but still fell short of offering a plan to ensure participation.

Many developing countries reeling from the worst economic impacts of the crisis do not qualify for current debt relief plans because they are classified as "middle-income" countries.

"Beyond expanding relief and aid to more countries, we need to permanently reduce debts for many developing countries during this severe global crisis," noted LeCompte. "Emergency aid can be delivered to countries by accessing global reserve funds or what's known as the Special Drawing Rights."

The Ministers also discussed improving transparency for global debt data, distribution of vaccines for low-income countries and growing economic crisis in Lebanon.