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G20 proposing extension of debt relief for world’s poorest nations

By on October 13, 2020 0 96 Views

The Group of 20 industrialized countries are proposing the extension of debt-relief initiative granted to some world’s poorest nations till the second half of 2021 due to the impact of the coronavirus pandemic.

According to a Bloomberg report, the G20 is poised to discuss the proposal on Wednesday when it meets.

The G-20 also is likely to discuss the challenge of getting private creditors to participate in the relief and how to restructure debt for nations that require it, Bloomberg people who are familiar with the discussion but asked not to be identified speaking before the meetings.

At its April meeting, the G-20 announced the launch of the Debt Service Suspension Initiative to provide billions of dollars in relief for 73 eligible nations that are among the world’s poorest, running from May through December.

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So far, more than 40 have applied for help, with most refraining from demanding a waiver from private creditors for fear they could be locked out of debt markets.

World Bank President David Malpass on Monday called on the G-20 to extend the debt relief through the end of next year and said that hedge funds and China should participate more in the efforts. The World Bank estimates nations could save $12 billion owed to government creditors this year.

“Right now the consensus is through June, not the full year, but that’s one of the things that could change over the next few days,” said Eric LeCompte, the executive director of Jubilee USA Network, a non-profit group that advocates for debt relief for smaller economies.

The debt relief is a key theme at the annual meetings of the World Bank and International Monetary Fund being held virtually this week. The smaller Group of Seven last month backed an extension of the so-called DSSI while signaling criticism for China for failing to fully participate. China is owed almost 60% of the money that the world’s poorest nations would be due to repay this year.

China has made many loans to developing countries with terms that aren’t transparent and at higher interest rates than the nations can afford, Malpass said in August. That highlights the importance of China’s participation in the debt relief, he said.

The Institute of International Finance, a trade group that represents banks and financial institutions, says that any coercion to get private creditors involved would tip borrowers into default and hurt financial markets. A case-by-case approach with a focus on sustainable debt should be the next step in relief, the IIF said in a letter to the G-20 last month.

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