The world’s richest nations have agreed to renew a debt relief initiative for the poorest until at least the first half of 2021, below a world Bank request a one-year extension coronavirus pandemic entrenches poverty.
The G20, in a statement issued by Saudi Arabia, which holds the bloc’s presidency, said it could order a further six-month extension next year. The statement said G-20 members are disappointed with the lack of progress in extending the debt relief package to involve private creditors.
In an online press conference, World Bank President David Malpass called for more measures for significant debt reduction. “There is an urgent need for rapid progress on a framework as the risk of disorderly defaults increases,” he said.
The consequences for some countries are disastrous. African countries face a financing gap of $345 billion through 2023, the IMF said last week, with some forced to choose between servicing debt or spending on social and health programs.
The group of industrialized economies unveiled the Debt Service Suspension Initiative in April to provide billions of dollars in aid to 73 eligible countries. So far more than 40 have applied for the aid which was due to end at the end of December, most of them in sub-Saharan Africa. The World Bank estimates countries could save $12 billion owed to government creditors this year.
Eligible countries can also ask private creditors to freeze repayments, but only a few have done so – a major failure according to advocacy groups. This point was also echoed on Wednesday by the managing director of the International Monetary Fund, Kristalina Georgieva.
The private sector has “unfortunately” avoided debt relief, she told a virtual press conference. Meanwhile, “countries themselves have been hesitant to ask the private sector for fear that it will erode their future access to markets, the access they have won the hard way in previous years,” he said. she stated.
Role of China
Malpass had called on the G20 to extend debt relief until the end of next year and said hedge funds and China should participate more. China owes almost 60% of the bilateral debt that the world’s poorest countries are expected to repay this year.
He won the backing of German Finance Minister Olaf Scholz, who on Wednesday called for a deal that included “many other countries that are not currently participating in the debt suspension.” China must be “part of the solution”, he said.
Advocacy groups like the European Network on Debt and Development say government aid alone is insufficient. In a recent report, he compared the initiative to “emptying the Titanic with a bucket” and argued that it only pushed debt crisis risks “further down the road”.
A lack of participation from private and multilateral lenders limited the program’s impact, the network said, noting that only 24% of debt payments due from recipient countries between May and December 2020 were subject to the potential suspension.
Extending it to the first half of 2021 would cover 44% of the debt payments of countries that had requested their participation, according to the report.
The G-20 was also due to discuss digital taxation, but said the pandemic had affected work towards that end. Disagreements between the European Union and President Donald Trump’s administration have also hampered years-long talks over new rules. The Organization for Economic Co-operation and Development now aims to conclude the process by mid-2021, raising the risk of a transatlantic trade dispute and a proliferation of contentious national levies on global tech giants .
This story was published from a news feed with no text edits. Only the title has been changed.
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