An initiative that allows poor countries to suspend payments on official bilateral debt owed to G20 creditors until the end of 2020 may not get the one-year extension it seeks.
Some G20 creditor countries are reluctant to expand and extend coronavirus debt-service relief for the world’s poorest countries by another year, so a six-month compromise could emerge this week, it said. said World Bank President David Malpass on Monday.
Malpass, speaking to reporters at the start of the virtual annual meetings of the World Bank and the International Monetary Fund, said the G20 debt working groups had failed to reach an agreement on the two institutions’ efforts to a one-year extension of the G20 Debt Service Suspension Initiative (DSSI).
“I think there can be some compromise language which can be a six month extension [and] that it can be renewed depending on debt sustainability,” Malpass said.
Finance ministers and central bank governors from major G20 economies are due to meet via video conference on Wednesday. In May, they launched an initiative to allow poor countries to suspend payments on official bilateral debt owed to G20 creditor nations until the end of 2020, which Malpass says has so far freed up $5 billion. dollars to strengthen coronavirus responses.
Malpass and IMF Managing Director Kristalina Georgieva have warned that much more debt relief is needed for low- and middle-income countries, including principal reduction, to avoid a “lost decade” as the pandemic destroys economic activity.
Malpass said the two institutions would come up with a joint action plan to reduce the debt stock of poor countries whose debt is unsustainable.
But he said debtor countries needed to demand debt relief more strongly for more progress to be made.
“Leaders of debtor nations have shown deference to creditors,” Malpass said. “It has been very important that the leaders of the poorest countries speak out and express the need to alleviate the debt burden of creditor countries. This dialogue has not yet been as solid as I think it is necessary to move this process forward.
A new World Bank debt study released on Monday showed that among countries eligible for the G20 debt relief program, external debt soared 9.5% in 2019 to $744 billion before the pandemic does not strike.
The official bilateral debt of the poorest countries to G20 countries reached $178 billion in 2019, with 63% of the total owed to China. The study says China’s share of that debt stood at 45% in 2013, the year Beijing launched its global Belt and Road infrastructure campaign.