G20 agrees to extend debt relief for poor countries

RIYADH, Saudi Arabia — The Group of 20 finance ministers and central bankers agreed on Wednesday at a meeting to extend the debt suspension for poor countries by a further six months until June 2021 to help them weather the COVID- 19 crisis.

The ministers and governors expressed a commitment during a virtual meeting to continue working together to support the poorest countries as they address health, social and economic challenges caused by the pandemic, according to a communique from the Saudi G20 presidency.

“In light of the continued liquidity pressure, while progressively addressing debt vulnerabilities, we agreed to extend the Debt Service Suspension Initiative ( DSSI) by 6 months,” the communique said.

It added it could be further extended until the end of 2021 when the International Monetary

Fund and the World Bank hold their annual meeting next spring. The official communique also said G20 nations were “disappointed” with the response from the private sector on debt relief, and “strongly encourage” them to participate in the DSSI.

“Our collective efforts to maximize international assistance to countries in need is further complemented by multilateral development banks’ commitment of $ 75 billion to DSSI- eligible countries, part of their $ 230 billion commitment to emerging and low- income countries, as a response to the pandemic,” Saudi Arabia’s Finance Minister Mohammed al- Jadaan said at a news conference after the meeting.

The G20 remains committed to implementing the DSSI, allowing the poorest countries to suspend official bilateral debt- service payments and secure much- needed resources for targeted investments, Al- Jadaan said.

The G20 nations endorsed in April the DSSI to help poor countries manage the impact of the epidemic, allowing them to suspend payments on official bilateral debt until the end of 2020.

G20 finance ministers and central bankers said they also agreed on a “common framework” to individually deal with poor nations distressed by rising levels of debt.

Common framework

“The common framework is a historic achievement and a major breakthrough in the international debt agenda,” Al- Jadaan said.

“It facilitates timely and orderly debt treatment for DSSI- eligible countries, with participation of broad creditors, including the private sector.”

US Treasury Secretary Steven Mnuchin urged G20 members to quickly endorse the framework, saying it would ease “debt write- downs when needed, help promote debt sustainability, and support policy reforms” in low- income countries with high debt burdens.

Fresh economic forecasts reveal a troubling divergence between advanced economies, which are starting to recover from the pandemic disease and widespread lockdowns, and developing countries and emerging market economies, which face more dire straits and the growing risk of defaulting on debts.

The new debt restructuring framework will be finalized at an extraordinary meeting before a G20 leaders summit next month, the communique said.

An earlier draft had the ministers adopting the framework, but officials were unable to reach agreement on that step this week.