Want to help Nepal:

Then cancel debt

by Kanya Almeida

Questions abound as to how the impoverished Nepal, ranked 145 out of 187 on the United Nations Human Development Index (HDI) – making it one of the world’s Least Developed Countries (LDCs) – will recover from the disaster, considered the worst in Nepal in over 80 years.

Nepalese quake victims warm themselves around a bonfire at Tunshikel, Kathmandu (David Ramos/Getty Images)

One possible solution has come from the Jubilee USA Network, an alliance of over 75 US-based organizations and 400 faith communities worldwide, which said, Nepal could qualify for debt relief under the International Monetary Fund’s (IMF) new Catastrophe Containment and Relief Trust (CCR).

The IMF created the CCR this past February in order to assist poor countries recover from severe natural disasters or health crises by providing grants for debt service relief. Already, the fund has eased some of the financial woes of Ebola-impacted countries by agreeing to cancel nearly US$100 million of debt. Quoting World Bank figures, Jubilee USA said in a statement, “Nepal owes US$ 3.8 billion in debt to foreign lenders and spent US$ 217 million repaying debt in 2013.”

Nepal owes some US$ 1.5 billion each to the World Bank and the Asian Development Bank, as well as US$ 54 million to the IMF, US$ 133 million to Japan and US$ 101 million to China.

“In order for Nepal to receive relief from the IMF’s fund, the disaster must destroy more than 25 percent of the country’s ‘productive capacity’, impact one-third of its people or cause damage greater than the size of the country’s economy,” Eric LeCompte, Jubilee USA Network’s Executive Director. “It seems clear that Nepal will qualify for immediate assistance from the IMF.”

According to Jubilee USA Network, Nepal is scheduled to pay back US$ 10 million worth of loans to the IMF in 2015 and nearly US$ 13 million in 2016. Relieving the country of this burden will free up valuable and limited funds that can be redirect into the rescue and relief effort.

Strong emergency response

“Time is of the essence for the search and rescue operations,” Under-Secretary-General of Humanitarian Affairs and Emergency Relief Coordinator, Valerie Amos, said.

A situation report released over the weekend by the UN Office for the Coordination of Humanitarian Affairs (OCHA) said:“In Kathmandu Valley, hospitals are overcrowded, running out of space for storing dead bodies and lack medical supplies and capacity. BIR hospital [one of the country’s leading medical facilities] is treating people in the streets.”

“Nepal’s rebuilding efforts will take years and debt cancellation is a recipe for long-term financial stability,” LeCompte stressed.

“Since the IMF has clear rules in place and the financing available with their trust, aid [to Nepal] should come relatively quickly,” he added. “Unfortunately, with the bulk of the debt owed to the World Bank and Asian Development Bank, the rules for debt relief are less clear.

“It’s unfortunate that the World Bank, as a development institution, still has not yet released a plan similar to the IMF to respond rapidly to humanitarian crises. In the short term, the World Bank must offer a plan for grants and debt relief. I hope this crisis also motivates the World Bank to release their plans for a rapid response mechanism,” LeCompte said.

(IPS)