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G20 to extend debt relief for poor countries by six months

The initiative will now be extended until the end of June next year, G20 finance ministers and central bankers said after a virtual meeting hosted by the group's current president Saudi Arabia.

Australian Prime Minister Scott Morrison (Top-R) is seen on a screen attending a videoconference with G20 leaders to discuss the COVID-19 coronavirus, at the Parliament House in Canberra on 26 March 2020. Picture: AFP

RIYADH - G20 nations announced Wednesday a six-month extension to a debt suspension initiative for the world's poorest countries ravaged by the coronavirus pandemic, triggering criticism from campaigners who said it did not go far enough.

The 20 most industrialised nations had pledged in April to suspend debt service from the world's most vulnerable countries through the end of the year as they faced a sharp economic contraction caused by the pandemic.

The initiative will now be extended until the end of June next year, G20 finance ministers and central bankers said after a virtual meeting hosted by the group's current president Saudi Arabia.

"We have agreed to extend the Debt Service Suspension Initiative by six months," Saudi Finance Minister Mohammed al-Jadaan said.

In its final statement after the meeting, the group said the DSSI could be further extended until the end of 2021 when the IMF and World Bank meet next spring.

"In light of the continued liquidity pressure, while progressively addressing debt vulnerabilities, we agreed to extend the DSSI by six months, and to examine by the time of the 2021 spring meetings if the economic and financial situation requires to extend further the DSSI by another six months," the statement said.

"Given the scale of the COVID-19 crisis, the significant debt vulnerabilities and deteriorating outlook in many low-income countries, we recognise that debt treatments beyond the DSSI may be required on a case-by-case basis.

"In this context, we agreed in principle on a common framework for debt treatments beyond the DSSI."

'BARE MINIMUM'

The group said it would publish the common framework and discuss "outstanding issues" related to the DSSI at another extraordinary meeting of finance ministers and central bankers before the G20 summit in November.

The announcement prompted sharp criticism from global campaign groups who voiced the need for more extensive debt relief for vulnerable countries.

"The G20 took an important step today, but it didn't go far enough," said Najat Vallaud-Belkacem, the France director of the ONE campaign.

"They could have extended the debt service standstill until the end of 2021, helping the world's poorest countries combat this global pandemic. They simply chose not to."

Campaigners warn of a looming debt crisis across poverty-wracked developing nations.

The World Bank on Monday said the debt of the world's 73 poorest countries grew 9.5% last year to a record $744 billion.

The countries' debt burden owed to government creditors, most of whom are G20 states, reached $178 billion last year, it added.

"With the economic chaos caused by COVID-19 threatening to set the fight against poverty back decades, extending the Debt Service Suspension Initiative was the bare minimum the G20 could do," said Jaime Atienza, from Oxfam International.

'TSUNAMI OF DEBT'

"Despite the common framework announced - good news to deal with deep solvency problems but with details still unknown - the failure to cancel debt payments will only delay the tsunami of debt that will engulf many of the world's poorest countries."

The DSSI has received 46 applications from eligible countries across the world, most of them from Africa, the G20 said last month.

But the initiative has covered "a meagre 1.66%" of debt payments by developing nations this year, according to European Network on Debt and Development (Eurodad).

"Of the 46 beneficiary countries, it has had very limited impact due to the failure of private and multilateral lenders to participate," Eurodad said in a report that likened the initiative to "draining out the Titanic with a bucket".

"As a result, only 24% of the debt payments due to be made between May and December 2020 by beneficiary countries were actually subject to potential debt suspension."

Wednesday's talks come as the surging health crisis continues to batter the global economy and triggers unemployment on a massive scale.

Huge injections of government aid have kept economies from plunging further in 2020, but the continued presence of Covid-19 means the outlook is highly uncertain, the IMF said on Tuesday.

The recession has been less severe than expected but still deep and "the ascent out of this calamity is likely to be long, uneven, and highly uncertain", according to IMF chief economist Gita Gopinath.

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