Private creditors look to the IMF, others to support the poorest countries
LONDON (Reuters) – Private sector creditors have proposed short-term actions to support the world’s poorest economies in a draft letter to the G20 that says the current expansion of debt relief could be ” insufficient “to meet part of the short-term liquidity of these countries needs.
In remarks that echo those of the United Nations Economic Commission for Africa (ECA), the Institute of International Finance (IIF) has proposed the use of new or existing Special Drawing Rights (SDRs), implementing a facility proposed by the ECA to help countries respond in the short term – term debt repayments and support for the development of national bond markets in local currency.
The letter precedes Friday’s special Group of 20 meeting where officials expect to complete work on a common framework to address the debt problems of the world’s poorest countries, among the hardest hit economically by the pandemic. of COVID-19.
Group of 20 officials agreed last month to extend the Debt Service Suspension Initiative (DSSI) freeze on official bilateral debt payments until the first half of 2021 and said they would consider another six-month extension in April.
“The extension of the DSSI is considered necessary but perhaps insufficient to address the problems of liquidity shortage, highlighting the need for continued support from international financial institutions as well as the importance of market access”, The IIR said in the draft letter, seen by Reuters.
The members of the IIR include hundreds of private creditors around the world. World Bank chief economist Carmen Reinhart told an online event hosted by the Financial Times on Thursday that the lack of private sector participation had limited the impact of the freeze initiative. debt.
The senior Chinese official at the International Monetary Fund said on Thursday that he hoped a consensus for a new SDR allocation could be reached in the future despite the current cautiousness of the United States, the fund’s largest shareholder.
For countries facing not only liquidity but solvency problems, the IIR’s proposal includes a reform of the framework to ‘accelerate debt restructuring on a case-by-case basis’, as well as debt instruments, including bonds indexed to GDP.
The IIR said it is important to continue to engage with private creditors as reforms continue to take shape.
Reporting by Rodrigo Campos; additional reporting by Karin Strohecker and Andrea Shalal; Editing by Leslie Adler