G20 grants debt wish of poorer Covid-hit nations

Historic pact to build common framework for restructuring debt to help struggling nations with relief, repayments

paris — G20 countries have agreed for the first time on a common framework for restructuring government debt, in anticipation of the coronavirus crisis leaving some poorer nations struggling to pay and in need of relief.

With the Covid-19 pandemic straining the finances of some developing countries, G20 finance ministers said on Friday that more help was needed than a current temporary debt freeze, which will be extended until June 30, 2021.

Major creditors, including China, will be expected to follow the joint guidelines agreed by the G20, which lays out how debt deemed to be unsustainable can be reduced or rescheduled.

Non-governmental groups said the accord should have gone further by including middle-income countries and forcing private investors to accept cancellations.

IMF managing director Kristalina Georgieva last week said African states alone faced a financing gap of $345 billion through 2023 to deal with the pandemic and its economic impact.

The framework is ‘an unprecedented agreement and a major breakthrough in international debt agenda’ Mohammed Al Jadaan,

Finance Minister of Saudi Arabia

“I count on everyone’s constructive spirit to ensure swift and cooperative implementation of the common framework, with several countries already asking for debt treatments, in particular in Africa,” French Finance Ministser Bruno Le Maire told his G20 counterparts during an online meeting.

Mohammed Al Jadaan, the finance minister of Saudi Arabia, this year’s chair of the G-20, hailed the framework as “an unprecedented agreement and a major breakthrough in international debt agenda”.

China, which accounted for 63 per cent of overall debt owed to G20 countries in 2019, has been reluctant to acknowledge the need for outright cancellation or reduction of debts.

Under the new framework, creditor countries will negotiate together with a debtor country, which will be expected to seek the same treatment terms from private sector creditors.

The scheme borrows heavily from the rules established by the Paris Club, an informal grouping of mostly-rich country governments established in 1956, that until now was the only joint forum for negotiating debt restructurings.

The G20 finance ministers said in a joint statement that the new framework aims “to facilitate timely and orderly debt treatment” for countries eligible for the debt payment freeze put in place in April, but which only included private sector creditors on a voluntary basis.

“From now on all interested parties must ensure to implement the common framework. Debt transparency is extremely important,” Japanese Finance Minister Taro Aso told reporters. —