The recent outbreak of Ebola virus disease in some West African countries, especially the three major and hardest hit countries, has attracted mounting pressures from the International communities to have their debt cancelled by the International Monetary Fund (IMF).
The calls to have the debts of Guinea, Liberia, and Sierra Leone cancelled is coming not just from ant-poverty organizations, but also from the UN as they had urged some serious consideration for eliminating at least some of the debts of the three countries. The United States, the IMF's largest shareholder, has taken a stand on the issue as well as urging the crisis lender to wipe out around a fifth of the $480-million in debt owed by the three countries.
Such a move would free resources to restart economic activities in the countries where the disease has taken more than 7 800 lives, US Treasury Secretary Jacob Lew said. Meeting in Australia in mid-November, the Heads of the G20 group of leading economies stepped up the pressure when they said that the IMF's promise of $300-million to help fight the epidemic should include debt alleviation.
The calls for the IMF, which lends money to economies most in need, but usually with attached requirements for reforms and financial discipline, have spurred the institution into intense reflection, and it could come up with an initiative this month. "Staff are looking at further options to provide support to the Ebola-hit countries, through reform of an existing facility," a Fund spokesperson told AFP.
Traditionally bound to a narrow, orthodox mission of financial support and loans to governments that it expects to be repaid, the IMF in reality needs to expand its tools for aiding troubled economies. After the earthquake disaster in Haiti of 2010, the Fund did create a mechanism for dealing with natural catastrophes that hit its borrowers.
That made way for the IMF to eliminate $268-million that the Haitian government owed to the fund. But the mechanism is too restrictive to be applied to the Ebola epidemic: it is limited to "devastating" natural disasters. According to advocates of the move, even if the loans come with zero interest rates, they constitute a constant burden that can financially strangle the governments of Ebola-hit countries.
"A broad criticism of using loans to help very poor countries is that, formally, no matter how bad their situation gets, they must repay every penny," said David Roodman, an independent expert on economic development.
Sierra Leone and Guinea both have had to make loan repayments this year to the IMF despite the Ebola crisis, according to Fund data. The World Bank has understood the problem. It has mobilized $500-million for the three countries in the form of grants "which never need to be repaid," according to Bank spokesman Phil Hay. Doing the same is proving more difficult for the IMF. "It's like asking a banker to embrace not getting repaid - it goes against their nature," said Roodman.