The G20 group of leading economies agreed on Wednesday (15 April) to suspend debt payments owed to them by some of the world’s poorest countries in a bid to cushion the economic impact of the coronavirus pandemic.
Under the deal, pushed by France’s President Emmanuel Macron, G20 countries agreed to suspend some debt payments due from 77 of the world’s poorest countries. It covers money that is due to be paid to G20 governments up to the end of 2020 and will cover $12bn (€11bn) of payments.
The payments will instead have to be made between 2022 and 2024, along with interest accrued in the meantime.
Last week, EU Foreign Affairs chief Josep Borrell said that the EU was “supportive of a co-ordinated response for a debt moratorium for the poorest countries, with concessional loans from the International Development Association, aimed at easing the debt burden from bilateral official creditors.”
However, the European Commission has indicated that the EU will not establish any new financial instruments for developing countries and that any new lending would be made on IMF terms and conditions.
The move by the G20 comes ahead of the Spring Meetings of the World Bank and International Monetary Fund, starting on 17 April, where the international community is under mounting pressure to put together a financial rescue package for developing countries.
On 15 April, the International Monetary Fund forecast that the African economy will shrink by 1.6% in 2020, and, more significantly, that real per capita income will fall 3.9%. In Asia, meanwhile, economic growth will come to a standstill, with the Fund describing the likely impact of the coronavirus as “severe, across the board, and unprecedented”.
The UN Conference on Trade and Development, believes that a $2.5 trillion package of debt relief, extra liquidity via special drawing rights and aid to support national health systems, will be needed to rescue the economies of developing countries.
The IMF has already cancelled debt payments from 25 countries over the next six months and allocated $100bn for emergency loans. There have been calls to boost the reserves of member states) for the IMF and a capital increase for the World Bank to finance further stimulus measures.
“The G20’s decision to suspend debt repayments for the world’s most vulnerable countries is a vital first step in this ongoing crisis, and will enable those countries to prioritise fighting COVID-19 and to withstand the first wave economic impact of this global pandemic,” said Gayle Smith, President and CEO of The ONE Campaign.