G20 finance chiefs agree to provide debt relief to poor countries hit by COVID-19

G20 finance chiefs agree to provide debt relief to poor countries hit by COVID-19
G20 finance chiefs agree to provide debt relief to poor countries hit by COVID-19

 Financial leaders of the Group of 20 major economies; under the Saudi presidency endorsed on Friday a common framework for treating debt of developing countries; hit hard by the coronavirus pandemic.

Under the framework, creditor countries will negotiate together with a debtor country; which may seek the same treatment terms from private-sector creditors.

In detail a meeting headed by Saudi Arabia's Minister of Finance Mohammed Al-Jadaan and Governor of the Saudi Arabian Monetary Authority Dr. Ahmed Al-Kholifey, they agreed to extend the Debt Service Suspension Initiative (DSSI) to mid-2021.

In a communiqué following the meeting; finance ministers and central bank governors of the G20 said: "We remain committed to implementing the DSSI, in close coordination; to provide maximum support to DSSI-eligible countries."

"Recognizing that efficiently addressing ongoing debt vulnerabilities will require a case-by-case approach; but also strong creditors' coordination, the present document sets out a common framework for the G20; which is also agreed by the Paris Club; to facilitate timely and orderly debt treatment for DSSI-eligible countries; with broad creditors' participation including the private sector," the finance chiefs added.

According to the statement; the need for debt treatment, and the restructuring envelope that is required, will be based on an IMF-WBG Debt Sustainability Analysis (DSA) and the participating official creditors' collective assessment and will be consistent with the parameters of an upper credit tranche (UCT) IMF-supported program.

Treatment procedures



Debt eligible for the treatment will include all public and publicly guaranteed debts; which have an original maturity of more than one year.

The treatment necessary to achieve sustainability will take into account the cut-off date in the 2020 DSSI term sheet that protects new financing provided after March 24, 2020; the statement read.

The debtor country requesting a debt treatment will provide to the IMF, the WBG as well as creditors participating in the debt treatment, the necessary information regarding all public sector financial commitments (debt) while respecting commercially sensitive information.

All G20 and Paris Club creditors with claims on the debtor country, as well as any other willing official bilateral creditor with claims on the country, will coordinate their engagement, with the debtor country and finalize jointly the key parameters of the debt treatment, consistent with their national laws and internal procedures, the statement added.

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