RIYADH – The G20 yesterday promised to tackle the explosive issue of developing-nation debt, but failed to stake out any clear action, infuriating campaigners warning of a looming crisis.
The leaders of the world’s 20 richest nations reiterated their commitment to a moratorium agreed in April and extended last month allowing poorer countries to temporarily stop servicing eligible debt to focus their resources on combating the coronavirus crisis.
The so-called Debt Service Suspension Initiative (DSSI) will be extended through to June 30 next year, the final statement confirmed.
Currently, 46 out of 73 eligible nations have benefited from a suspension of interest payments to the tune of US$5.7 billion (RM23.33 billion).
Though Saudi Finance Minister Mohammed al-Jadaan called it “a major breakthrough”, it is a drop in the ocean compared to the US$11 trillion that G20 nations have spent to combat the economic effects of the pandemic.
“While the G20’s reaction in April was rapid, it’s currently lacking urgency,” said Oxfam France spokesman Louis-Nicolas Jandeaux.
The United Nations had hoped that the extension would run to the end of 2021, but instead, the G20 said its foreign ministers will review the situation in the spring.
Painfully aware that the DSSI alone will not be enough for some countries, the G20 has agreed on a common framework to restructure the debt of certain nations.
That framework has been called “historic” because for the first time, it includes private creditors and China, the world’s leading creditor to poorer countries, accounting for 63% of all such loans extended by G20 nations at the end of 2019.
Fears are growing that debt crises in developing nations could hamstring their ability to vaccinate their populations.
In March, panicked investors pulled out US$82 billion of capital from developing nations in a matter of days.
Since then, they have fallen foul of a vicious cycle of increasing costs to combat Covid-19, coupled with diminished income.
Remittances by migrant workers have been particularly hard hit.
As a result, developing nations will this year have access to US$700 billion less external financing than in 2019, according to the Organisation for Economic Cooperation and Development.
The DSSI is like “draining out the Titanic with a bucket”, said the European Network on Debt and Development.
The 46 beneficiary nations had a combined debt pile of US$71.5 billion at the end of 2018.
“The list of countries involved is too small,” said Jandeaux.
Middle-income countries like Lebanon are excluded, while others such as Kenya have declined to seek DSSI relief for fear of a credit ratings downgrade that would see their borrowing costs increase, as happened in Cameroon. – AFP, November 23, 2020
