Creditors agree on debt relief for poor nations

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WASHINGTON/PARIS • Major international creditors will suspend debt payments this year for the world’s poorest countries, who will be hit hardest by the rapidly spreading coronavirus pandemic that has sparked the steepest downturn in the global economy since the 1930s.

French Finance Minister Bruno Le Maire said some 76 countries, including 40 in sub-Saharan Africa, would be eligible to have debt payments worth a combined US$20 billion suspended by official and private creditors, with a remaining US$12 billion in payments due to multilateral institutions still to be sorted out.

“We have obtained a debt moratorium at the level of bilateral creditors and private creditors for a total of US$20 billion,” Le Maire told journalists.

Group of Seven (G7) finance ministers and central bank governors met by video conference on Tuesday and threw their support behind a push to provide temporary debt relief to the poorest countries.

In a joint statement, they said they were ready to provide “a time-bound suspension on debt service payments due on official bilateral claims for all countries eligible for World Bank concessional financing” if joined by China and other countries in the Group of 20 major economies, and as agreed with the Paris Club group of creditors.

World Bank President David Malpass, in a tweet, thanked U.S. Treasury Secretary Steven Mnuchin for hosting the G7 meeting and backing his joint call with International Monetary Fund Managing Director Kristalina Georgieva for the temporary debt standstill.

The World Bank and the IMF have begun disbursing emergency aid to countries struggling to contain the spread of the novel coronavirus and mitigate its economic impact. They first issued their call for debt relief on March 25, but China — a major creditor — and other G20 nations have not endorsed the proposal.

The pandemic will hit the poorest countries especially hard since they lack adequate health-care systems and have already seen massive capital flight.

France’s Le Maire said official government creditors, including not only the Paris Club but also China and other members of the G20, were to suspend US$12 billion under the agreement, which still needs to be finalized on Wednesday.

Separately, a senior German official spoke of a debt moratorium by official creditors worth up to US$14 billion, a number previously given by Malpass.

In addition, G7 officials also called for more contributions to the IMF’s facilities that support the poorest countries, and said the debt relief effort should include private creditors on a voluntary basis, as well as efforts to enhance debt transparency.