RELIEF

G20 extends debt freeze for 6 more months

Developing countries have been pushing hard for extension of the debt freeze

In Summary
  • During an International Monetary and Financial Committee(IMFC) meeting the countries also said they were in talks for an option to extend it further.
  • The G20 Debt Service Suspension Initiative approved in April has seen 43 of 73 eligible countries defer just over $5 billion in official bilateral debt payments.
The International Monetary Fund logo at the IMF headquarters building during/FILE
The International Monetary Fund logo at the IMF headquarters building during/FILE
Image: /FILE

The G20 creditor countries have agreed to extend the G20 Debt Service Suspension Initiative (DSSI) for at least another six months from the end of 2020.

During an International Monetary and Financial Committee meeting the countries also said they were in talks for an option to extend it further if necessary.

“We need strong international cooperation to speed up global recovery; it could add almost $9 trillion to global income by 2025. This, in turn, could help narrow the income gap between richer and poorer nations,” said IMF Managing Director Kristalina Georgieva

Georgieva has been warning that far more debt relief is needed for low- and middle-income countries, including principal reduction, to avoid a “lost decade” as the pandemic destroys economic activity.

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 is less than half the relief that would have been possible if all eligible countries had requested forbearance.

Developing countries have pushed hard for extension of the debt freeze, but say further measures are needed to help middle-income countries not currently eligible for the G20 initiative.

Officials from Kenya and Costa Rica told an Institute of International Finance online panel that countries like China and Russia - not currently part of the Paris Club government debt relief architecture - should provide more help.

“The desire to rope in all creditors, and particularly China and Russia is 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.”

Odile Renaud-Basso, who chairs the Paris Club of official creditors, told a panel the DSSI initiative had provided critical short-term relief for some countries and lauded China’s participation, but said further efforts were required.