G20 must push relief to avoid debt crises – experts, campaigner
Wealthy nations must improve their floundering flagship debt relief initiative or face a spate of debt crises in the developing world, experts and campaigners say as a meeting of finance chiefs of G20 major economies opened on Thursday.
As the pandemic battered global economies, the Group of 20 leading economies launched measures, including a temporary debt service suspension for poor countries to provide breathing room, as well as the Common Framework – a debt restructuring scheme for long-term relief.
The Debt Service Suspension Initiative (DSSI) has now expired. Meanwhile, having signed up for the Common Framework a year ago, Zambia, Ethiopia and Chad have yet to receive relief.
Their uncertain fate, coupled with the fear of being punished by the market, have led other governments to steer clear of the Common Framework.
“It doesn’t give them any incentives,” the Washington-based Center for Global Development’s Daouda Sembene, a former director at the International Monetary Fund (IMF), told Reuters.
“Unfortunately, it so far has done some harm and not necessarily good.”
Alarm bells are ringing for many. According to the IMF, some 60% of low-income countries – mostly in Africa – are either in debt distress or at high risk of it, up from less than 30% in 2015. read more
This year, 74 low-income nations must repay $35 billion to bilateral and private lenders – nearly double from 2020, the World Bank calculated. With the U.S. Federal Reserve on the verge of hiking interest rates, borrowing costs are set to increase for riskier emerging markets.