G20 offers poorer nations no assurances on debt relief extension

The Group of 20 leading economies will take a decision on extending the current suspension of debt repayments by the poorest countries closer to the end of the year, putting off assurances of additional relief as the global pandemic ravages nations around the world.

All member countries have started implementing the Debt Service Suspension Initiative that currently is set to only run through December and the G-20 expects the standstill to make $14 billion available for use in confronting the virus, Finance Minister Mohammed Al-Jadaan of host Saudi Arabia told reporters on Saturday after a virtual meeting of ministers and central bankers. So far, 42 countries have requested help under the plan, leading to the suspension of $5.3 billion in repayments.

The move to consider extending debt suspension follows calls from the World Bank, International Monetary Fund and charities such as Oxfam. The rate of Covid-19 infections is increasing in many countries, and even with the G-20’s April agreement that aims to waive bilateral debt payments from vulnerable countries, the cost of servicing obligations crowds out health and social expenses.

The World Bank last month forecast emerging markets’ output will shrink for the first time in at least six decades.

The virus and worldwide recession will lead to rising poverty in impoverished nations and debt burdens for some countries are rising to crisis levels, World Bank President David Malpass said in remarks prepared for Saturday’s meeting. He urged the G-20 to extend the standstill through the end of 2021 and broaden the scope.

‘Increasingly Desperate’

“The situation in developing countries is increasingly desperate,” Malpass said. “Time is short. We need to take action quickly on debt suspension, debt reduction, debt resolution mechanisms and debt transparency.”

Al-Jadaan said the G-20 will receive a progress report from the IMF and World Bank toward the lenders’ annual meetings in October to help decide on the next steps.

IMF Managing Director Kristalina Georgieva said in a statement she hoped the G-20 would consider an extension of the debt moratorium, without giving a specific time frame. The IMF is stepping up action to make better use of existing special drawing rights, or reserve assets, she said.

After Saturday’s meeting, French Finance Minister Bruno Le Maire said France supports extending the debt service suspension through the end of 2021, and that the nations are on a good path to get an agreement. He said that European nations continued to discuss work to establish a tax for digital companies by the end of the year and a minimum tax for corporations to fight evasion.

However, the commitments made at Saturday’s meeting may not yet go far enough, according to Jubilee USA Network, a nonprofit group that advocates for debt relief for smaller economies.

“Given the severity of the current crisis, we hoped we’d see more action,” Jubilee’s Eric LeCompte said in a statement.

-With assistance from Vivian Nereim, Reema Alothman and Matthew Martin.