PARIS--Major international creditors have agreed to suspend debt payments owed by the poorest countries this year, throwing a financial lifeline to help them cope with the coronavirus crisis, France's finance minister said on Tuesday.
Some 76 countries, of which 40 are in sub-Sahara Africa, were eligible to have debt payments worth a combined $20 billion suspended, out of a total of $32 billion the countries were to spend on debt servicing this year. "We have obtained a debt moratorium at the level of bilateral creditors and private creditors for a total of $20 billion," Bruno Le Maire told journalists.
The government creditors, including not only the Paris Club group of creditors, but also China and other members of the Group of 20 economic powers, are to suspend $12 billion under the agreement, which remains to be finalised on Wednesday.
Group of Seven (G7) finance officials on Tuesday threw their support behind a push to provide temporary debt relief to the poorest countries, if it was backed by China and other G20 countries, and could be agreed with the Paris Club group of creditors. Separately, a senior German official spoke of a debt moratorium by official creditors worth up to $14 billion, which was the same number provided by World Bank President David Malpass last month.
"We're glad in particular that China agreed to participate in this moratorium. All that will free up money for the countries that need it the most," Le Maire said.
China has become a major creditor to developing countries, especially in Africa, but there is little transparency about how much they owe. G7 officials said debtor and creditor nations should work with the International Monetary Fund and World Bank to enhance debt transparency and implement appropriate monitoring of use of freed resources.
Private creditors have agreed on a voluntary basis to roll over or refinance $8 billion in debt, a French finance ministry source said.
The UK-based Jubilee Debt Campaign, which is leading a push by nearly 140 campaign groups and charities for cancellation of debt payments by the poorest countries, said the agreement would give countries more resources to fight the pandemic, while merely suspending the payments meant interest would continue to accrue. "We urgently need G20 governments to commit to engaging in a UN process to agree a comprehensive and enforceable way to cancel debts down to a sustainable level, ready to be implemented in 2021. Otherwise today’s debt suspension will be next year’s debt crisis," the group said.
Le Maire said of the total $32 billion due this year, the remaining $12 billion is owed by multilateral lenders, mainly the World Bank, Le Maire said, urging such lenders to join the debt relief initiative.
The World Bank and the IMF called last month on government creditors to give debt relief and the IMF said on Monday it would do so for 25 countries under its Catastrophe Containment and Relief Trust, which has about $500 million in resources on hand.
French President Emmanuel Macron said in a television address to the French nation on Monday that African countries should be helped by "massively cancelling their debt". Le Maire said that at the end of the year outright debt cancellation should take place on a case-by-case basis and in coordination with multilateral lenders depending on the economic situation of the countries as well as developments in commodity markets and capital flows.
