Saudi Arabia leads G20 to agree on debt suspension for world’s poorest countries

Saudi Arabia’s King Salman urged G20 leaders on Thursday to take firm measures and “effective and coordinated” action to combat the ongoing coronavirus pandemic. (G20 Saudi Arabia)

DUBAI (RAHNUMA)  Financial officials of the Group of 20 major economies said on Wednesday they had agreed on a coordinated approach for a suspension of debt service payments for the world’s poorest countries starting on May 1 until the end of the year.

The decision to suspend both principal repayments and interest payments affects all the International Development Association (IDA) countries that are currently on debt service to the International Monetary Fund and the World Bank, and all least developed countries as defined by the United Nations that are currently on any debt service to the IMF and the World Bank.

The move is part of efforts to provide stimulus to the global economy amid the new coronavirus outbreak, which is pushing the global economy into the steepest downturn since the Great Depression.

“We agreed on a coordinated approach with a common term sheet providing the key features for this debt service suspension initiative, which is also agreed by the Paris Club,” the G20 said in a joint statement.
They also called on private creditors to participate in the initiative “on comparable terms.”

Mohammed Al-Jadaan, who chaired the meeting, said the G20 had delivered on two concrete actions.

“First, delivering a joint G20 action plan in response to COVID-19 … in order to advance international economic cooperation as we navigate this crisis and look ahead to a robust and sustained global economic recovery,” he said.

“And second, providing international financial assistance to the most vulnerable countries.”

The IMF director Kristalina Georgieva and World Bank David Malpass on Wednesday praised the new G20 debt relief agreement, which suspends bilateral debt service payments by poor countries.

Georgieva, in a statement to a meeting of G20 leaders also said the IMF was “urgently” seeking some $18 billion in new resources for the Fund’s Poverty Reduction and Growth Trust for poor countries and was exploring how the use of special drawing rights could aid this effort.

The debt suspension will last until the end of the year but creditors will consider a possible extension during 2020, the G20 said.

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