The Group of 20 nations pledged on Sunday to tackle the explosive issue of developing country debt but failed to take any clear action, angering activists worried about a looming crisis. The G20 reaffirmed its April agreement to suspend debt payments by poor countries to combat coVID-19, and concluded by announcing that the Debt Repayment Initiative (DSSI) would be extended until 30 June 2021, with 46 out of 73 eligible countries suspending interest payments of $5.7 billion.
Saudi Finance Minister Mohammed al-Jadaan called it a major breakthrough, but it is clearly a drop in the ocean when compared with the $11tn spent by G20 countries to combat coVID-19. Louis-nicolas Jandeaux, a spokesman for Oxfam France, said: “The measures taken by the G20 in April were very rapid, but there is no sense of urgency in what is being done.”
The United Nations had previously said it wanted to extend DSSI until the end of 2021, but the G20 said its foreign ministers would review the situation in the spring before making a decision. The G20 recognises that DSSI alone is not enough to solve the debt problems of some countries, so it has agreed on a common framework to restructure the debt of some countries. The Jakarta Post notes that the framework is historic because it includes, for the first time, private creditors as well as China, the main creditor of poor countries, accounting for 63% of all relevant loans provided by the G20 by the end of 2019. Jandeaux warns: “The framework treats debt relief only as a final option, and it is not binding. There is a lack of participation by private creditors and we strongly encourage them to participate on comparable terms when they meet the requirements of qualifying countries.”
Zambia faced default on Wednesday (18 November) after private creditors refused to temporarily freeze its debt repayments, the first African country to do so since the coVID-19 outbreak. On the same day, Bolivia said it wanted to suspend debt repayments until economic conditions improved. There is growing concern that the debt crisis in developing countries could hamper countries’ ability to vaccinate their people against the coronavirus. As of late 2018, 46 qualified national debt totaled $71.5 billion, while Jandeaux thinks, a list of countries eligible to too little, middle-income countries such as Lebanon were excluded, and other countries such as Kenya declined to seek DSSI reduction of subsidies, the reason is worry about the credit rating downgrade would lead to increased its borrowing costs, such as Cameroon.
In March, as much as $82 billion in capital was withdrawn from developing countries in a matter of days amid fears. It was then that they were caught in a vicious cycle from which they could not escape, which increased the cost of fighting coVID-19, but also reduced incomes in the countries concerned, and migrant workers’ remittances were hit particularly hard. As a result, developing countries will receive $700bn less in external financing this year than in 2019, according to the Organisation for Economic Co-operation and Development. According to Eurodad, DSSI are acting like the last buckets of water driving the Titanic with a bucket.
At the g20 summit of the video after the meeting, President of the international monetary fund (IMF), ORR chiellini Eva (Kristalina Georgieva) on Sunday (Nov. 22) also issued a statement saying: “I am the g20 as a whole during the meeting to express praise, their unprecedented action to mitigate the impact of the outbreak of the new champions league, including fiscal and monetary measures, these measures will help to prevent mass bankruptcy and deeper crisis.”
She added: “DSSI, in particular, provides temporary breathing space for many poor countries. The recognition by g20 leaders at this meeting of a common framework other than DSSI will also make it vital that low-income countries with unsustainable debt can apply for permanent debt relief on a case-by-case basis, leveling the playing field for creditors and implementing the framework quickly and effectively. Going forward, we must help countries that are not covered by the framework address their debt vulnerabilities and make their economies more resilient.”
Olkieva also thanked the G20 for its support of the IMF, enabling it to provide more than $100 billion in new financing to 82 countries and regions without debt relief for poor members. She also made a point of saying that the world is not out of the woods yet in the crisis that the new coronavirus has led to.