Frozen: the G20 would be on the verge of extending the moratorium on the debt of the poor | Coronavirus pandemic
The G20 group of major economies are said to be on the verge of extending a multibillion-dollar debt freeze for the world’s poorest countries to help them weather the coronavirus crisis, and may take a common approach to do so. in the face of longer-term debt restructuring.
Finance ministers and central bankers from China, the United States and other G20 countries outlined their plans in a draft statement seen by Reuters news agency on Tuesday, and are expected to finalize language when they meet online Wednesday morning.
A new World Bank study showed on Monday that among the countries eligible for G20 debt relief, the weight of external debt increased by 9.5% in 2019 to reach $ 744 billion even before the pandemic. .
With the coronavirus now ravaging economies, the World Bank has warned that 150 million more people could be pushed into extreme poverty by the end of next year.
Preparatory meetings between G20 deputies involved “intense” discussions, according to several sources familiar with the talks, noting that China, Turkey and India had balked at language that would lock them into future debt cancellations.
Beijing, the emerging market economies’ biggest new creditor, opposed adopting a common framework to address debt problems beyond the G20 debt moratorium, a move supported by the Group of Seven advanced economies, one of the sources said. “The fight is far from over,” the source added.
Chinese officials have said they cannot commit to future implicit debt reductions in the common framework, as this would be illegal under Chinese law, the source said. One solution may be to note the need for each country to follow “national approval procedures” in a timely manner, a second source said.
G20 MPs are expected to meet again early Wednesday, even before the principals meet at 10:30 GMT to discuss the final details, the sources said.
The G20 Debt Service Suspension Initiative (DSSI) approved in April has seen 43 of 73 eligible countries defer just over $ 5 billion in official bilateral debt payments, but that’s less than half the relief that would have been possible if all eligible countries had requested abstention.
The lack of private creditors also remains a problem, as does China’s failure to participate fully with all of its public institutions, according to top economists.
‘Prepare for the worst’
World Bank Chief Economist Carmen Reinhart, speaking at an online forum at the annual meetings of the International Monetary Fund (IMF) and the World Bank, urged parties to “hope for the best and prepare for the worst ”.
IMF Managing Director Kristalina Georgieva said last week that African states alone face a $ 345 billion funding gap through 2023 to deal with the pandemic and its economic effects.
Developing countries have pushed for the extension of the debt freeze, but say more measures are needed to help middle-income countries that are not currently eligible for the G20 initiative.
Angola’s Finance Minister Vera Daves told an online forum hosted by the IMF and the World Bank that an extension of the DSSI would be “very helpful.”
Officials from Kenya and Costa Rica told an Institute of International Finance online panel that countries like China and Russia – which are not currently part of the government’s debt relief architecture of the Paris Club – should provide more help.
“The desire to tie up all the creditors, and particularly China and Russia, I find that great,” said Patrick Njoroge, governor of the Central Bank of Kenya. “China has never really been there and that has always been one of the weaknesses of the Paris Club.”
“Greater debt relief”
The draft statement underscored the need for private sector participation and said all official bilateral creditors should implement the initiative fully and transparently.
Odile Renaud-Basso, who chairs the Paris Club of official creditors, told a panel that the DSSI initiative has brought crucial short-term relief to some countries and praised China’s participation, but said further efforts were needed.
“The question is what is the next step,” she said, adding that some countries that had unsustainable debt levels before the pandemic would likely need “more debt relief” which reduce their overall debt level – a step that would require the involvement of China and other non-Paris Club members, as well as the private sector.
Costa Rica’s central bank president Rodrigo Cubero echoed the remarks, saying it was vital that non-Paris Club lenders be part of the backing and calling for more than just flexible lines of credit. the IMF and other institutions.