G20 declares framework on debt relief for poor nations
G20 nations on Friday declared a framework to restructure debt of dozens of coronavirus-ravaged developing countries, but campaigners said it was not enough to alleviate a “wave of debt crises”.
20 nations on Friday declared a framework to restructure debt of dozens of coronavirus-ravaged developing countries, but campaigners said it was not enough to alleviate a “wave of debt crises”.
20 nations last month agreed a six-month extension to a debt suspension initiative until June next year, falling short of calls by the World Bank and campaigners for a full-year renewal.
The group’s finance ministers and central bankers declared a “common framework” to reschedule or reduce debts of vulnerable nations on a “case-by-case approach”.
“In principle, debt treatments will not be conducted in the form of debt write-off or cancellation,” they said in a statement following a virtual meeting hosted by the current G20 president Saudi Arabia.
“If, in the most difficult cases, debt write-off or cancellation is necessary… specific consideration will be given to the fact that each participating creditor shall fulfill its domestic approval procedures in a timely manner while keeping other creditors informed of progress.”
Seventy-three countries are eligible to have their debt restructured under the G20’s debt service suspension initiative (DSSI), including 38 in sub-Saharan Africa.
The agreement on the framework marks a leap for China, a major creditor to poor countries that officials say has resisted attempts to write off debts.
Over the past two decades, China has financed projects in developing nations, including as part of its Belt and Road Initiative to build infrastructure to further expand trade.
French Economy Minister Bruno Le Maire hailed Friday’s agreement as “historic”.
“For the first time, all the main bilateral creditors, members or non-members of the Paris Club, will coordinate the debt treatment of the low income countries,” Le Maire said.
“It will bring more transparency in the debt relief process and involve private creditors, who will need to commit to at least comparable terms.”
But warning of a looming debt crisis across poverty-wracked developing nations, campaigners said the initiative was far from sufficient.
“This announcement falls far short of what is needed to tackle the wave of debt crises in poorer countries,” said Tim Jones, head of policy at Jubilee Debt Campaign, a British charity.
“With many countries facing debt crises… the G20 need to stop kicking the can down the road and build a transparent and inclusive system for cancelling debts to a sustainable level across private, bilateral and multilateral lenders.”
Last month, the World Bank said the debt of the world’s 73 poorest countries grew 9.5 percent last year to a record $744 billion.
The countries’ debt burden owed to government creditors, most of whom are G20 states, reached $178 billion last year, and China is owed more than 63 percent of that.