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WASHINGTON DC: G20 nations announced a six-month extension on Wednesday (Thursday in Manila) to a debt suspension initiative for poor countries devastated by the coronavirus pandemic, which failed to comply with requests from the World Bank and activists for a year-round renewal.
The 20 most industrialized nations had pledged in April to suspend the debt service of the world’s most vulnerable countries until the end of the year, as they faced a sharp economic contraction caused by the Covid-19 pandemic.
The initiative will now run until the end of June next year, the G20 finance ministers and central bankers said after a virtual meeting, as they also agreed on a “common framework” to individually treat poor nations afflicted by rising oil prices. Debt.
“We have agreed to extend the Debt Service Suspension Initiative for six months,” said Mohammed al-Jadaan, the finance minister of Saudi Arabia, the current chairman of the G20.
In its final statement after the meeting, the group said the DSSI could be extended further until late 2021 when the IMF and World Bank meet next spring “if the economic and financial situation warrants” the move.
“Given the scale of the Covid-19 crisis, significant debt vulnerabilities and deteriorating prospects in many low-income countries, we recognize that debt treatments beyond DSSI may be required on a case-by-case basis.” .
The group pledged to publish the common framework before the G20 leaders’ summit in November. The agreement on the framework marks a leap forward for China, a major creditor to poor countries that officials say has resisted attempts to write off debts.
“The G20 took an important step today, but it didn’t go far enough,” said Najat Vallaud-Belkacem, director of the ONE campaign in France.
“They could have extended the suspension of debt service until the end of 2021, helping the poorest countries in the world to fight this global pandemic. They just chose not to. “
Activists warn of an impending debt crisis in poverty-stricken developing nations. The World Bank said Monday that the debt of the world’s 73 poorest countries grew 9.5 percent last year to a record $ 744 billion.
Countries’ debt burden to government creditors, most of which are G20 states, reached $ 178 billion last year, and China is owed more than 63 percent of that.
“The trend in past debt crises (was) for countries with debt problems to go through a series of ineffective debt rescheduling that left them weaker,” said World Bank President David Malpass.
“Creditors may eventually allow them to go through a debt reduction process, but at tremendous cost to the poor. We need to work better and faster this time. “
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