Aftershocks Pummel Highly Indebted Nepal: Poor Country Spends 217 Million Annually on Debt Payments
As Nepal experiences aftershocks from Saturday's earthquake, it may find relief in the IMF's Catastrophe Containment and Relief Trust, a fund that cancels the debt of poor countries in crisis.
Severe aftershocks continue to terrorize Nepal which was struck by a 7.8 magnitude earthquake on Saturday. The rising death toll climbed beyond 3,000 people. Nepal is one of the least developed countries in the world, ranking 145th out of 187 countries in the United Nations Human Development Index. According to the World Bank, Nepal owes $3.8 billion in debt to foreign lenders and spent $217 million repaying debt in 2013. Nepal owes approximately $1.5 billion each to the World Bank and the Asian Development Bank and $54 million to the International Monetary Fund (IMF). It owes $133 million to Japan and $101 million to China.
“Nepal is one of the least developed countries in the world and needs immediate financing to recover,” said Eric LeCompte, executive director of the religious development coalition, Jubilee USA Network. "Relieving Nepal's debts not only provides resources now, but can also help the country rebuild."
Nepal is one of 38 countries eligible for assistance from the IMF's new Catastrophe Containment and Relief Trust (CCR). The IMF created the CCR in February to provide debt relief to poor countries impacted by natural disasters or health crises. The new fund canceled nearly $100 million in debt for Ebola-impacted countries. In order to qualify for relief from the new fund after a natural disaster, a country must meet certain criteria. The disaster must destroy more than 25% of the country's "productive capacity," impact one third of its people or cause damage greater than the size of the country's economy. It is not yet known if Nepal will qualify. Of the $54 million Nepal owes the IMF, $10 million is due in 2015 and nearly $13 million is due in 2016.
"This new IMF fund can provide urgent relief as Nepal struggles to recover," noted LeCompte, who serves on expert groups to the United Nations that focus on debt. "Given the amount Nepal owes to the World Bank, we really need the Bank to take leadership and cancel debt. It's time for the World Bank to release its own plans for a crisis rapid response facility."
The World Bank is working on a new facility to respond quickly to disasters but has yet to publicly release any details. The IMF asked governments to fund its new trust for future crises. The United Kingdom and Germany recently pledged $72 million in contributions. During the Spring IMF meetings, Austria, Portugal and Mexico also announced they would contribute $16 million more.
"Debt relief can help Nepal," said LeCompte. "The earthquake shows how debts keep poor countries ill prepared for crisis."
In 2010, Jubilee USA moved the IMF to cancel Haiti's debt after its earthquake and to create a new debt relief fund for countries struck by disasters. Last Fall, Jubilee USA worked with the White House to urge the IMF to use that fund to cancel debt for Ebola-impacted Sierra Leone, Guinea and Liberia. In February, the IMF revised the previous debt relief fund and expanded it to include countries impacted by health crises. It then announced $100 million in debt relief for the three West African countries and called on governments to cancel $70 million more in Ebola-affected country debt.
Jubilee USA Network is an alliance of more than 75 US organizations and 400 faith communities working with 50 Jubilee global partners. Jubilee's mission is to build an economy that serves, protects and promotes the participation of the most vulnerable. Jubilee USA has won critical global financial reforms and more than $130 billion in debt relief to benefit the world's poorest people. www.jubileeusa.org