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02:17
The G20 finance ministers agreed for the first time on a new joint framework for the restructuring of public debt. More discussion is expected at the group’s leaders’ summit on November 21-22.
The coronavirus crisis has exacerbated economic problems in countries that were already struggling with a high debt burden. The G20 framework, developed during this year’s meeting hosted by Saudi Arabia but conducted online, is designed to help those countries with mounting payments owed to creditors.
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The group plans to suspend debt service payments for 77 low-income countries. The World Bank estimates that highly indebted countries owe nearly $ 14 billion in loans in 2020. National governments account for 45 percent of the creditor pool, while the other 55 percent are made up of multilateral lenders such as the IMF. together with private lenders. .
Although for some activists the relief does not go far enough, they argue that what is needed is a total cancellation of all debts, not just a suspension of payments.
“We are seeing unprecedented economic action from the EU, the UK and the US to support their own economies,” says Tim Jones, head of policy for the Jubilee Debt Campaign.
“It only takes a small drop to tackle this debt problem in the poorest countries.
“It is vital, otherwise the next 10 years will be a lost decade of economic stagnation and increasing poverty.”
Some economists warn of the challenges of trying to get all creditors to agree on further debt restructuring. The makeup of the lenders is no longer just the Paris Club of rich countries, which have historically lent money to developing countries.
“The group of creditors is different, so the moment you have to negotiate a debt restructuring means that there are different players at the table,” says Andrea Presbitero, an economics professor who has worked with the IMF.
“It is not just the Paris Club, but China and other emerging donors must be attracted and private creditors must be attracted.
“This is probably the most challenging situation because it is difficult for everyone to agree on the same terms.”
French President Emmanuel Macron was one of the first G20 leaders to call for a new debt deal. But since then his country has had to spend hundreds of billions of dollars to prop up its own pandemic-hit economy. And the UK, a member of the G20, has not ruled out a cut in its foreign aid budget due to COVID-19.
