G20 declares framework to deepen debt relief for poor countries

Saudi Arabia is the current chairman of the G20 group of countries which has declared a common framework for prolonged debt relief for poor countries affected by the coronavirus. – G20 / AFP press office

RIYAD: G20 countries on Friday declared a “common framework” for an expanded plan to restructure the debt of developing countries ravaged by the coronavirus, but campaigners warned that more was needed to mitigate a “wave of the debt “.

G20 countries agreed last month to a six-month extension of a debt suspension initiative until June of next year, short of calls from the World Bank and campaigners for a renewal of the debt. ‘a full year.

The framework, also endorsed by the Paris Club of creditor countries, goes beyond this initiative to reschedule or reduce the debts of vulnerable countries on a case-by-case basis, G20 finance ministers and central bankers said.

“In principle, the debt treatments will not be carried out in the form of write-off or cancellation of debt,” they said in a statement after a virtual meeting organized by the current president of the G20, Saudi Arabia.

“If in the most difficult cases debt cancellation or cancellation is required … special attention will be paid to ensuring that each participating creditor must complete their national approval procedures in a timely manner.

French Economy Minister Bruno Le Maire called the framework agreement “historic”.

“For the first time, all major bilateral creditors, Paris Club members or not, will coordinate the treatment of the debt of low-income countries,” said Le Maire.

“This will bring more transparency to the debt relief process and involve private creditors, who will have to make commitments on at least comparable terms.”

A senior US Treasury official said that “the scale of the pandemic crisis” and the “deteriorating outlook” in many low-income countries justified the need for prolonged debt relief.

Seventy-three countries are eligible for debt restructuring, including 38 in sub-Saharan Africa.

‘Breathing space’

The deal marks a major milestone for China, one of the major creditors of poor countries which officials say has resisted attempts to write off debts.

Over the past two decades, China has funded projects in developing countries, including under its Belt and Road Initiative to build infrastructure to further develop trade.

The treasury official blamed Chinese creditors for “a lack of full participation” and transparency.

“We have a political commitment to this common framework for the future,” the official said.

“But we will certainly be watching closely how this works in practice. And with a particular eye on Chinese participation.”

Warning of a looming debt crisis in poverty-ravaged developing countries, activists said the framework was far from sufficient.

“This announcement falls well short of what is needed to tackle the wave of debt crises in the poorest countries,” said Tim Jones, policy manager at Jubilee Debt Campaign, a UK charity.

“With many countries facing debt crises… the G20 must stop kicking the box and put in place a transparent and inclusive system to cancel debts at a sustainable level among private, bilateral and private lenders. multilateral. “

Last month, the World Bank said the debt of the world’s 73 poorest countries rose 9.5 percent last year to a record $ 744 billion.

Countries’ debt burden to government creditors, most of whom are G20 states, reached $ 178 billion last year, and China owes more than 63%.

“The debt service suspension initiative has provided countries with much needed ‘breathing space’,” said IMF Managing Director Kristalina Georgieva.

“But there are countries where debt levels are unsustainable. This is where the right common framework comes into play – a coordinated approach to dealing with debt, a standardized approach, but with a resolution to the case. by case. “

Georgieva said it was “extremely important” to involve the private sector.

In a letter to G20 President Saudi Arabia, the Washington-based Institute of International Finance said private creditors were ready to participate in the extended debt relief initiative, but until now they have received few applications from eligible countries.

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