Debt relief plans for poor countries progress – world
Marc Jones and Andrea Shalal (Reuters)
London, UK/Washington, USA ●
Fri, May 29, 2020
Debt relief plans for the world’s poorest countries advanced on Thursday as private creditors presented a plan for their involvement, although it was immediately criticized for not going far enough.
The proposal led by the Institute of International Finance (IIF) said creditors would grant debt relief on a case-by-case and voluntary basis this year, after concluding that a one-size-fits-all approach would have been “virtually impossible”.
It was the culmination of work involving more than 100 top fund managers after the Group of 20 economies called on the private sector to match its recent Debt Service Suspension Initiative (DSSI) to help 77 countries low income.
“The IIF insisted that creditors of all types and sizes have a role to play in ensuring that the world’s most vulnerable countries have the liquidity they need to fight the COVID-19 pandemic” , said IIR President and CEO Tim Adams.
The G20 proposal and the IIF plan only cover until the end of the year, and without a coronavirus cure expected in the coming months, that might not be enough.
UN chief Antonio Guterres on Thursday called for expanded debt relief and urged the International Monetary Fund to increase its currency’s allocations of special drawing rights (SDRs) to give countries better access to finance.
African countries face a combined $44 billion debt service bill this year alone. It is estimated that the pandemic and economic shutdowns could push up to 60 million people into extreme poverty around the world.
“Crushing debt relief cannot be limited to the least developed countries,” António Guterres told a high-level UN meeting on how to manage the economic fallout from the pandemic. “It must be extended to all developing and middle-income countries that request forbearance as they lose access to financial markets.”
World Bank President David Malpass also warned at the conference that “much more” debt relief would be needed. He said about half of the 77 countries eligible for G20 debt relief had so far requested help, and more were pledging.
All official bilateral creditors should offer assistance, he stressed, and commercial creditors should “participate on comparable terms and not exploit the debt relief of others”.
He, however, rejected calls for the World Bank and other multilateral development banks to freeze debt payments, saying it would hurt their ability to provide much-needed finance.
The Saudi G20 secretariat, in a statement released after an extraordinary task force meeting, said the debt relief initiative could provide $14 billion in liquidity as more countries commit to it. But he said the amount could be even higher if additional creditors such as multilateral development banks and private sector creditors join the initiative.
The IIF’s plan included coordination with the International Monetary Fund, World Bank, Paris Club, United Nations Economic Commission for Africa and more than a dozen finance and development ministers representing countries. eligible for the DSSI.
UN officials say debt relief is imperative to allow developing economies to spend more to contain the coronavirus and limit what economists fear is an inevitable debt crisis.
Tim Jones, head of policy for the Jubilee Debt Campaign, a charity that focuses on poverty reduction, was critical.
“Overall, the G20 agreement in April and the IIF proposal today fall far short of addressing the unprecedented nature of the coronavirus debt crisis,” Jones said.
Some countries could end up paying significantly more in the medium term due to accrued interest, he said, and some lenders could ignore the plan, which is voluntary.