G-20 suspends poor nations' debt payments for 6 months
The G20 has decided to extend its debt relief to help poor countries fight the Covid-19 pandemic by another six months.
Originally approved in May 2020, the Debt Service Suspension Initiative was supposed to run till December 2020. Pakistan was approved under the initiative and $1.8b of its external debt service payments falling due till December were rescheduled under it.
With the new announcement made, all debt service payments owed to bilateral creditors from December to June 2021 will also be rescheduled.
"In light of the continued liquidity pressure, while progressively addressing debt vulnerabilities, we agreed to extend the DSSI by six months, and to examine by the time of the 2021 IMF/WBG Spring Meetings if the economic and financial situation requires to extend further the DSSI by another 6 months," said the communique issued by the G20 finance ministers and central bank governors after the meeting.
The group said they find that the initiative is "significantly facilitating higher pandemic-related spending" in those countries that have availed it.
More than 70 countries participated in the initiative since it was launched in May. According to data on the DSSI page of the World Bank website, Pakistan is estimated to have saved $2.706bn in debt service payments under the initiative. The data is updated till Oct 6, 2020 and "based on monthly projections for May-December 2020, based on end-2018 public and publicly guaranteed debt outstanding and disbursed".
Estimates are not available for the savings that the extension till June 2021 will bring. The money saved this year from the debt service payments will be repaid later in a few years time once the initiative expires.
While the global economy is experiencing a sharp contraction in 2020 due to the impact of the COVID-19 pandemic, the outlook is less negative with global economic activity showing signs of recovery as our economies have been gradually reopening and the positive impacts of our significant policy actions started to materialize. However, the recovery is uneven, highly uncertain and subject to elevated downside risks. We reaffirm our determination to continue to use all available policy tools as long as required to safeguard people's lives, jobs and incomes, support the global economic recovery, and enhance the resilience of the financial system, while safeguarding against downside risks.
The G20 Action Plan, endorsed at our meeting on 15 April 2020, sets out the key principles guiding our response and our commitments to specific actions to drive forward international economic cooperation as we navigate this crisis and take steps to support recovery and achieve strong, sustainable, balanced and inclusive growth. Recognizing that members are in different stages of responding to the crisis and that the global economic outlook continues to evolve, we endorse the updates to the G20 Action Plan (Annex I).
These updates will ensure that we promptly respond to the evolving health and economic situation. The global landscape continues to be rapidly transformed by economic, social, environmental, technological, and demographic changes. We will sustain and strengthen as necessary our efforts, considering the different stages of the crisis, to achieve strong, sustainable, balanced and inclusive growth, while making the most of current transformations in shaping the recovery, in a way consistent with our precrisis agenda.
We reiterate our commitment that the G20 Action Plan is a living document and to regularly review, update, track implementation of, and report on it.
We underscore the urgent need to bring the spread of the virus under control, which is key to supporting global economic recovery, and will take forward the commitments agreed at the G20 Finance and Health Ministers meeting on 17 September 2020. We will continue to facilitate international trade, investment and to build resilience of supply chains to support growth, productivity, innovation, job creation and development. We will continue to take joint action to strengthen international cooperation and frameworks.
Following is the group's statement: We remain committed to continue working together to support the poorest countries as they address health, social and economic challenges associated with the COVID-19 pandemic. We remain committed to implementing the Debt Service Suspension Initiative (DSSI), allowing DSSI-eligible countries to suspend official bilateral debt service payments through end-2020.