Developing countries' debt: Rockefeller Foundation proposes 'Growth and Investment Reset'
The Rockefeller Foundation proposed a 'Growth and Investment Reset' initiative to help indebted developing countries access new funds for economic growth and investment. The plan aims to coordinate IMF, World Bank, and private lender efforts to inject affordable financing, as interest payments now exceed 10% of revenue in developing countries.
Developing countries spend average of 10% of revenues on interest payments Rockefeller Foundation aims to move forward under G20 next year Developing countries' debt coming due just as interest rates surge By Andrea Shalal WASHINGTON, Oct 7 (Reuters) — The Rockefeller Foundation and its partners on Wednesday proposed an initiative to help heavily indebted developing countries access fresh funds to grow their economies, undertake needed investments and tap private capital flows.
Three top development experts said the new "Growth and Investment Reset" was aimed at staving off deep debt distress for more low- and lower-middle income countries by coordinating the efforts of the International Monetary Fund, World Bank, bilateral official creditors and private lenders. It aims to inject affordable financing into countries saddled with high debt levels and stop them from using low-interest multilateral loans to pay off debts to bilateral creditors like China, the authors said in a paper published Wednesday.
Their goal is to secure needed political agreements and move forward under the G20, which will be run by Britain next year, following the US presidency this year. "Developing countries are struggling with unprecedented interest burdens that crowd out essential investments. Without urgent action, this will get worse," the authors said. " The proposal comes days before next week's annual meetings of the IMF and World Bank in Bangkok, where the myriad challenges facing developing countries — including a super El Niño, high energy costs, a sharp drop in official development aid and soaring borrowing costs — will be discussed.
Christina Segal-Knowles, a senior Biden administration official and one of the paper's authors, said interest payments now exceeded 10% of revenue in developing countries on average. They topped outlays for public investment in 10 countries. Some 40 countries with sustainable debt levels would be eligible for the initiative, said Segal-Knowles, although debt restructuring would still be needed for some countries. The other authors are Mary Svenstrup, also a senior official in the Biden administration, and Masood Ahmed, a former senior IMF and World Bank official, and former head of the Center for Global Development, a Washington-based think tank.
Their proposal calls for the IMF to set up a dedicated program to inject significant amounts of long-term financing into vetted countries, in coordination with the World Bank's lending and guarantees. It would come on top of regular lending. The plan also calls for bilateral official creditors such as China to agree to roll over debt from "Reset" countries. It would leverage scaled-up guarantees from the World Bank and other multilateral development banks, helping countries to refinance loans from private creditors where debt was unsustainable.
The World Bank, the Inter-American Development Bank and the African Development Bank have provided guarantees to swap existing high-cost debt or lower the cost of new debt. com; +1 202-815-7432;)