G20 extends debt relief to mid-2021, pushes private sector to help
By Davide Barbuscia and Andrea Shalal
DUBAI / WASHINGTON (Reuters) – Leaders of the world’s 20 largest economies on Sunday approved a plan to extend the freeze on public debt service payments by the poorest countries until mid-2021 and have supported a common approach to face their debt problems.
In a joint statement, the leaders of the Group of 20 also strongly encouraged private creditors to participate in the initiative on comparable terms and said they were monitoring the particular challenges facing Africa and small island states.
The G20 debt relief initiative – launched shortly after the start of the pandemic in the spring – has helped 46 of 73 eligible countries defer $ 5.7 billion in debt service payments into 2020, freeing up funds for countries to fight the pandemic and strengthen their economies.
But the lack of private sector participation and countries’ concerns about future access to capital markets limited the success of the debt freeze, which was initially expected to generate some $ 12 billion in additional liquidity.
Some major creditor countries, including China, have also failed to include all public institutions, such as the Development Bank of China, in their responses to requests for debt relief.
The COVID-19 crisis has exacerbated concerns about high debt levels affecting not only low-income countries, but also some middle-income states.
The Managing Director of the International Monetary Fund, Kristalina Georgieva, called for swift and effective implementation of the debt treatment framework to provide permanent debt relief to the poorest countries, but said other countries also needed help.
“In the future, we must also help countries not covered by the framework to address debt vulnerabilities so that their economies can become more resilient,” Georgieva said in a statement after addressing G20 leaders.
Eric LeCompte, UN adviser and executive director of Jubilee USA Network, said the new framework would push the private sector to get involved as it made G20 debt relief conditional on countries demanding similar treatment from private creditors , but offered no guarantees.
He said the G20 initiative also left out countries in need of urgent aid.
“Six of the 12 countries with the highest COVID death rates are middle-income countries, which remain outside the scope of the G20 debt process,” he said.
The United States has said it is open to expanding the framework to include middle-income countries and small island states, but U.S. officials said that view is currently not shared by all. G20 members.
(Reporting by Davide Barbuscia in Dubai and Andrea Shalal in Washington; Editing by Kevin Liffey)