Figures released by the World Bank suggest that China accounts for about half of the debt suspended through DSSI to date. So far, 41 countries have asked G20 countries for debt relief worth $ 8.8 billion under this program. G20 countries had suspended a total of $ 5.3 billion in debt repayments as of July 2020, with China accounting for more than half of the debt relief granted to date, according to the figures.
The G20 countries announced in April that they had agreed on a coordinated approach to suspend debt repayments of the world’s poorest countries during the coronavirus pandemic. At the time, the World Bank estimated that about $ 11.5 billion in debt could be eligible for relief under the program.
However, World Bank President David Malpass criticized the response rate of G20 countries to requests for debt relief and called for the regime to be extended to commercial debt, in a statement made on July 18. 2020 in Washington. Currently, commercial lenders and the World Bank are not part of the program and only repayments under official bilateral credit agreements are covered by DSSI.
While the World Bank has continued to push commercial lenders to participate in DSSI, including specifically calling on the Development Bank of China, its own views on the matter seem firm for the time being. In a speech on May 28, David Malpass said the multilateral development bank’s involvement in debt relief “would be detrimental to the poorest countries in the world.”
Financial expert Kanyi Lui of Pinsent Masons, the law firm behind Out-Law, said: “From a sovereign debtor perspective, the involvement of commercial lenders and investors in the relief discussions debt is not necessarily desirable due to reputational issues, credit downgrades and the potential impact on their future access to international capital markets ”.
“In addition, as past restructurings have shown, the involvement of commercial lenders and investors in debt relief discussions is not necessarily conducive to an effective process,” he said.
“Given the prudential, regulatory and commercial pressures on commercial lenders and investors, in the absence of significant changes in the global framework, it remains to be seen how they might be incentivized to respond to the World Bank’s call to participate in debt relief and DSSI debt cancellation discussions, ”he said.