World's biggest economies extend time for debt payment of more than $14 billion to support poor countries in fight against Covid-19.

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.
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. (Reuters Archive)

G20 nations have announced an extension of the debt suspension initiative for the world's poorest countries by an additional six months, until June 2021, amid the coronavirus pandemic. 

"We have agreed to extend the Debt Service Suspension Initiative (DSSI) by six months," Saudi Finance Minister Mohammed al Jadaan said after a meeting of G20 finance ministers and central bank governors.

In its final statement after the meeting, the group said the extension would be until June 30 next year, and it 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," the statement said.

The group also agreed "to examine by the time of the 2021 spring meetings if the economic and financial situation requires to extend further the DSSI by another 6 months," the statement added.

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 suspension of more than $14 billion in debt payments had been due to expire at the end of the year.

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Over 40 poor nations sought debt relief

The announcement comes after campaigners and the World Bank called for the debt suspension initiative to be extended through the end of 2021.

Some charities such as Oxfam had said it needs to be stretched through 2022.

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 percent" 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 percent of the debt payments due to be made between May and December 2020 by beneficiary countries were actually subject to potential debt suspension."

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Pakistan wants outright cancellation of debt payments

Transparency International, Amnesty International, and a collective of groups called CIVICUS had written to the G20 finance ministers ahead of their meeting to warn that the world is facing a crisis unlike any in the last century and that debt suspension is only a first step. 

Though the global economy has begun a gradual recovery with the reopening of businesses and borders, the recovery has been sharply uneven. 

The groups said that many of the poorest countries are still spending more on debt payments than on life-saving public services. 

They urged the G20 nations to cancel existing debt until at least through 2021. Some countries, like Pakistan, have called for an outright cancellation of debt payments.

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Source: TRTWorld and agencies