G20 will Discuss how to Alleviate the Debt of Developing Countries
The ministers of Economy and Finance and the central bankers of the countries that make up the G20 will meet this Friday. They will discuss the measures that alleviate the debt burden on developing countries. This will help improve their response to COVID-19.
As reported by the Group of Twenty, Friday’s meeting will be chaired by the Saudi Finance Minister, Mohammed Aljadaan. As well as by the governor of the Saudi Arabian Monetary Authority, Ahmed Aljholifey. The only point on the list is to adopt a common framework for debt treatments. They go beyond the suspension of bilateral debt service.
In October, the G20 agreed to suspend bilateral debt service payments. This suspension applied to developing countries that request it for an additional six months. In this way, until June 2021, they will not have to face bilateral debt payments.
Besides, during the spring meetings of the IMF and the World Bank in 2021, they committed to assessing another extension for an additional six months, if necessary. It will depend on the economic situation.
The group will try to agree on additional support measures for this suspension of payments. That is due to significant debt vulnerabilities and a deteriorating economic outlook.
In October, the G20 countries expressed disappointment at the lack of progress on the part of private creditors in participating in the debt suspension initiative and encouraged them to participate when debtor countries requested.
The IMF and the World Bank asked to postpone payments in March
In March, the International Monetary Fund and the World Bank requested that debt holders from developing countries postpone payments. David Malpass, the president of the World Bank, invited the G20 countries. It was intended to help them in terms of liquidity to fight against the coronavirus pandemic.
The two organizations requested the debt payments of all countries belonging to the International Development Association, IDA, be postponed. It’s an entity part of the World Bank that helps the world’s poorest countries. In fact, it formed in 1960. It worked to reduce poverty by providing grants for programs that boost economic growth and improve living conditions.
According to the Washington-based agencies, this measure will help meet the immediate liquidity needs of IDA countries to meet the challenges of the coronavirus outbreak. Deferring the debt will also allow an assessment of the impact of the crisis and the financing needs of each country.
The World Bank and the IMF believe that it is imperative at this time to provide a global sense of support to developing countries. Besides, it is a strong signal for financial markets, both entities assured.
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