Major creditors agree to suspend debt payments by poorest countries

PARIS/WASHINGTON: Major international creditors have agreed to suspend debt payments owed by the poorest countries this year, throwing a financial lifeline to help cope with the coronavirus crisis, France's finance minister said yesterday.

Some 76 countries, of which 40 are in sub-Sahara Africa, were eligible to have debt payments worth a combined US$20 billion (RM86.6 billion) suspended, out of a total of US$32 billion the countries were to spend on debt servicing this year.

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

The government creditors, including not only the Paris Club but also China and other members of the Group of 20 economic powers, are to suspend US$12 billion under the agreement, which remains to be finalised today.

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

"We're glad in particular that China agreed to participate in this moratorium. All that will free up money for the countries that need it the most," Le Maire said.

China has become a major creditor to developing countries, especially in Africa, but there is little transparency about how much they owe.

Private creditors have agreed on a voluntary basis to roll over or refinance US$8 billion in debt, a French finance ministry source said.

Of the total US$32 billion due this year, the remaining US$12 billion is owed by multilateral lenders, mainly the World Bank, Le Maire said, urging such lenders to join the debt relief initiative.

The World Bank and the International Monetary Fund called last month on government creditors to give debt relief and the IMF said on Monday it would do so for 25 countries under its Catastrophe Containment and Relief Trust, which has about US$500 million in resources on hand.

French President Emmanuel Macron said in a television address to the French nation on Monday that African countries should be helped by "massively cancelling their debt".

Le Maire said that at the end of the year outright debt cancellation should take place on a case-by-case basis and in coordination with multilateral lenders depending on the economic situation of the countries as well as developments in commodity markets and capital flows.

Meanwhile, Group of Seven (G7) finance officials vowed to continue to act as needed to combat the coronavirus pandemic and stabilise the global economy, and threw their support behind a push to provide temporary debt relief to the poorest countries.

In a joint statement, G7 finance ministers and central bankers 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.

Following a video conference, the 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.

"Ministers and Governors reiterated their pledge to do whatever is necessary to restore economic growth and protect jobs, businesses, and the resilience of the financial system," they said in the statement, saying they would continue to work closely together in other forums, such as the G20, the IMF, the World Bank and the Financial Stability Board (FSB).

"The scale of this health crisis is generating unprecedented challenges for the global economy," they said, underscoring the importance of a well-coordinated international response and vowing to use "all available policy tools" to reducing the depth of the crisis.

The officials said they were working to address the global shocks caused by the pandemic, which are hitting emerging markets and developing economies particularly hard.

They said they supported measures taken by the IMF, the World Bank and regional development banks to provide flexible and rapid financing in response to the crisis, including the IMF's temporary expansion of access to emergency aid and its proposed introduction of a short-term liquidity line.

The officials also expressed support for the FSB's efforts to mitigate the financial stability risks posed by the pandemic, including through the use of flexibility within existing international regulatory standards.

They said they would continue to consider further near-term actions to stabilise the global economy, and pledged to return to other priority agenda items, such as debt transparency and sustainability, digitalisation and illicit financial flows, once the immediate impact of the crisis abated. – Reuters

source https://www.thesundaily.my/business/major-creditors-agree-to-suspend-debt-payments-by-poorest-countries-CM2259114