G20 agrees on debt relief for poorest countries

With the global economy plunged into the worst recession in a century, the Group of 20 nations have announced a one-year debt standstill for the world’s poorest nations as they struggle to deal with the coronavirus pandemic.

The G20, which brings together the world’s largest economies, also reiterated the pledge to deploy “all available policy tools” to deal with the health and economic crisis caused by COVID-19.

With over 2 million cases and death toll approaching 130,000 worldwide, many of less developed countries are facing the heaviest burden since they do not have the spending power to handle medical supply and economic fallout caused by widespread lockdowns imposed to prevent the viral contagion.

The G20 finance ministers and central bankers endorsed “a time-bound suspension of debt service payments for the poorest countries,” and in the communique following their virtual meeting, said, “all bilateral official creditors will participate in this initiative.”

Saudi Finance Minister Mohammed Al-Jadaan, who chairs the group, said this means “poor countries don’t need to worry about repaying over the course of the next 12 months.”

The initiative will “provide more than US$20 billion of immediate liquidity” for poor countries to use “for their health system and support their people facing COVID-19,” he told reporters on Wednesday.

The G20 officials “put our money where our mouth is, and commit to further support the world as it faces this pandemic,” he said.

The International Monetary Fund and World Bank had been calling on governments to provide debt relief to the countries most in need, and finance ministers from the Group of Seven agreed to do so on Tuesday providing the G20 was in favor.

The IMF and World Bank hailed the announcement, calling it “a powerful, fast-acting initiative that will do much to safeguard the lives and livelihoods of millions of the most vulnerable people.”

The Washington-based lenders have rushed to roll out emergency financing and have received requests for aid from 100 countries.

Our target is to triple what we do for these countries,” said IMF chief Kristalina Georgieva.

The G20 also called on private creditors, working through the Institute of International Finance, to participate in the initiative which extends to the world’s 76 poorest countries eligible for concessional financing from the International Development Association.

Tim Adams, head of the global banking association, said the IIF recommended that private creditors “voluntarily grant ... debt payment forbearance” when requested for a fixed period of time.

The IMF has called the economic crisis the “Great Lockdown,” warning it will slash US$9 trillion off global growth as the world economy contracts by 3 percent this year, the worst downturn since the Great Depression in the 1930s.