[ad_1]
The G20 group of major economies is reportedly poised to extend a multi-billion dollar debt freeze to the world’s poorest countries to help them weather the coronavirus crisis and may take a common approach to dealing with debt restructuring. longer term.
Finance ministers and central bankers from China, the United States and other G20 countries outlined their plans in a draft statement seen by the Reuters news agency on Tuesday, and are due to finalize the writing when they meet online early Wednesday.
A new World Bank study on Monday showed that among countries eligible for G20 debt relief, the external debt burden had risen 9.5 percent in 2019 to $ 744 billion even before the pandemic. .
With the coronavirus now devastating economies, the World Bank has warned that 150 million more people could be pushed into extreme poverty by the end of next year.
The preparatory meetings between the G20 deputies involved “intense” discussions, according to multiple sources familiar with the talks, noting that China, Turkey and India had all refused language that would block them from future debt cancellations.
Beijing, the largest new creditor for emerging market economies, opposed adopting a common framework to address debt concerns beyond the G20 debt moratorium, a move backed by advanced economies in the Group of the Seven, said one of the sources. “The fight is far from over,” added the source.
Chinese officials said they could not commit to future debt reductions implicit in the common framework, as it would be illegal under Chinese law, the source said. One solution may be to point out the need for each country to work through “national approval procedures” in a timely manner, said a second source.
G20 MPs are due to meet again early on Wednesday, even before directors meet at 10:30 GMT to discuss final details, sources said.
The G20 Debt Service Suspension Initiative (DSSI) passed in April has seen 43 out of 73 eligible countries defer just over $ 5 billion in official bilateral debt payments, but that’s less than half the relief that would have been possible if all eligible countries had requested patience.
The absence of private creditors also remains a problem, as does the failure of China to fully engage with all of its state institutions, according to leading economists.
‘Prepare for the worst’
World Bank chief economist Carmen Reinhart, speaking in an online forum during the annual meetings of the International Monetary Fund (IMF) and the World Bank, urged the parties to “hope for the best and prepare for the worst.”
Some of the poorest countries in the world, including Honduras, are part of a World Bank initiative to help them cope with high levels of debt. [File: Jorge Cabrera/Reuters]
IMF Managing Director Kristalina Georgieva said last week that only African states face a financing gap of $ 345 billion through 2023 to cope with the pandemic and its economic effects.
Developing countries have pushed hard for the debt freeze to be extended, but say more measures are needed to help middle-income countries that are currently ineligible for the G20 initiative.
Angolan Finance Minister Vera Daves said in an online forum organized by the IMF and the World Bank that an extension of the DSSI would be “very useful.”
Officials from Kenya and Costa Rica told an online panel at the Institute of International Finance that countries like China and Russia, which are not currently part of the Paris Club government’s debt relief architecture, should provide more help.
“The desire to attract all the creditors, and particularly China and Russia, I think 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.”
‘Greater debt relief’
The draft communiqué underscored the need for private sector participation and said that all official bilateral creditors should implement the initiative fully and transparently.
Odile Renaud-Basso, who chairs the Paris Club of Official Creditors, told a panel that the DSSI initiative had provided crucial short-term relief for some countries and praised China’s involvement, but said more efforts were needed.
“The question is what’s next,” he said, adding that some countries that had unsustainable debt levels before the pandemic would likely need “deeper debt relief” to reduce their overall level of debt, a step that would require participation. from China and other countries. non-members of the Paris Club, as well as the private sector.
Costa Rica’s central bank president Rodrigo Cubero echoed those comments, saying it was vital for non-Paris Club lenders to be part of the support and called for more than flexible lines of credit from the IMF and others. institutions.
[ad_2]
