‘Debt standstill’ arrangement vital for emerging economies - Cabraal | Sunday Observer

‘Debt standstill’ arrangement vital for emerging economies - Cabraal

Nivard Cabraal
Nivard Cabraal

One of the most important strategies needed now is to negotiate a ‘Debt Standstill’ agreement with the International Monetary Fund (IMF) and the World Bank (WB) for at least two years because the current crisis in not a localised problem but rather a major global issue which needs a global solution, Senior Advisor on Economic Affairs to the Prime Minister Ajith Nivard Cabraal told Sunday Observer Business on Friday.

He said that he had expressed the need for a debt standstill arrangement with the global lenders mid last month as the current crisis continued to intensify.

“Global institutions such as the IMF and the WB was formed after the Second World War to help restore confidence and regain economic momentum in the world. The WB was mandated to revive the economy while the IMF was to bring stability to the global economy. It is in their mandate to ensure the global economy is stable  and is able to grow,” Cabraal said.

The former Central Bank Governor said the current crisis has caused serious instability in the global economy and as a result many countries particularly the emerging economies are facing stress in the debt repayment capacity. If they were to continue to repay without any adjustments or relief many countries will not be able to revive the economy and millions of people and businesses in these economies will face grave hardships,” Cabraal said adding that there is a great possibility that these economies will default in loan repayments and the banking sector of these countries will be unstable.

 He said some relief has to be given to these institutions by the governments of emerging nations. 

“To do so, governments in turn have to be provided  with a facility where they can  have a standstill in their loan repayments due to the IMF and the WB. If this facility is not provided  there will be a great deal of stress  caused to these economies and some may even default loan repayments,” Cabraal said, noting that it is in the interest of advanced nations also for the IMF and the WB to take some extraordinary steps to safeguard economies of emerging nations.Cabraal believes that a high level team from the emerging economies  should get together and make representations to the multilateral  institutions and the G-7 countries to take steps to provide relief to the global economy as soon as possible and by doing so the global economy will have a quick passage towards normalisation and that would be the interest of all businesses as well.He said such a measure will lead to confidence being restored in the global economy and recovery would be hastened which will bring relief to millions of people worldwide.The government expressed interest in resuming negotiations with the IMF early this year which the global lender said it would review the request for a new funding arrangement.A staff team from the IMF met with the new administration and discussed its policy agenda early this year.