G20 leaders call on creditors to push for debt freeze initiative

Finance officials from the Group of 20 countries on Saturday called for wide participation by bilateral creditors to implement a debt freeze initiative for the world’s poorest countries.

All official bilateral creditors should adhere to the debt suspension initiative “fully and in a transparent manner”, they said in a joint statement.

G20 finance ministers and central bankers held talks on Saturday aimed at spurring global economic recovery from a coronavirus-triggered recession amid growing calls to widen debt relief for crisis-hit poor countries.

The ongoing virtual talks, hosted by Saudi Arabia. The talks, chaired by Saudi Finance Minister Mohammed Al Jadaan and central bank governor Ahmed al-Kholifey, come a day after the European Union held its first face-to-face summit in five months to discuss a post-virus economic rescue plan.

World Bank President David Malpass on Saturday urged the Group of 20 major economies to extend a freeze in official debt payments by the poorest countries through the end of 2021, and said they should start talks on reducing the debt of some countries.

Malpass told a virtual meeting of G20 finance officials that some major official creditors were not participating fully in the Debt Service Suspension Initiative (DSSI), and private creditors should stop collecting payments from the poorest countries. “Even with these immediate steps ... many of the poorest countries won’t be able to make the resulting debt burdens sustainable in the medium term,” he said. “I urge the G20 to open the door to consultations about the debt overhang itself and effective ways to reduce the net present value of both official bilateral and commercial debt for the poorest countries.”

France’s finance minister said on Saturday he had proposed to G20 counterparts that a 2020 debt payment freeze be extended to the end of 2021, and that there were positive signs that an agreement could be reached.

“I think we are well on our way to reaching an agreement on this key subject,” Bruno Le Maire told reporters.

Germany pledged 3 billion euros ($3.4 billion) at a meeting of G20 finance ministers to help the world’s poorest countries, the finance ministry said on Saturday.

The funds will be made available as long-term loans for the International Monetary Fund’s Poverty Reduction and Growth Trust (PRGT).

In April, IMF officials said they had received pledges of a combined $11.7 billion from Australia, Japan, Canada, France and Britain to replenish the PRGT. The United States has not yet pledged any money for the programme.

“With the funds ... low-income countries can receive greatly discounted loans and bridge liquidity bottlenecks,” the German finance ministry said.

It added that Germany will provide a total of 8.7 billion euros for international aid measures in 2020 and 2021.

The debt standstill, which is due to expire at the end of 2020, has proven challenging to implement, with only 41 of 73 eligible countries expressing interest, while some official bilateral creditors like China have failed to participate fully.

The private sector has also failed to match the freeze thus far.

The initiative would save $12 billion in service payments on official bilateral debt through the end of the year, but finance officials in developing countries say they will need far more help to weather the pandemic and its economic fallout.

Top international officials, industry leaders and civil society groups have called for extending the debt freeze - which is intended to let the poorest nations focus on fighting the pandemic, not servicing their debts - and expanding it to include other countries hit by the crisis.

Kristalina Georgieva, the International Monetary Fund’s managing director, has warned that despite some signs of recovery, the global economy faces sustained headwinds, including the possibility of a second wave of COVID-19.

Finance officials from the Group of 20 major economies on Saturday said they remained committed to resolving differences over digital services taxes and reaching a broad, consensus-based solution on the issue this year.

 Younis Haji Al Khoori, Undersecretary of the Ministry of Finance (MoF), participated in the fourth meeting of the Group of Twenty, G20, Finance and Central Banks’ Deputies which was held remotely on the 16th and 17th of July.

The meeting discussed the third G20 Finance Track Communiqué which reflects the group’s commitment to bring the financial response needed to COVID-19 outbreak and provide the best solutions to accelerate the restoration of global economic. Al Khoori stressed the importance of global coordination to support countries in creating the necessary fiscal space to respond to the local spending needs, and the need to provide an integrated programme to monitor infrastructure financing, and to bring effective solutions to address the emergency financing needs, particularly for developing countries. That, in addition to the importance of dealing with the rapid spread of digital coins, and their potential implications on the global financial system.

Agencies