The G20’s Debt Service Suspension Initiative to help the world’s poorest countries free up funds as they battle the Covid-19 pandemic has received 41 applications so far, the group said.
The applications include requests from 26 African countries, the G20 said after two days of meetings by the International Financial Architecture working group on June 23 and 24.
The initiative stands to benefit 73 eligible members of the International Development Association that are currently on a debt service plan with the International Monetary Fund and the World Bank, and the least developed nations as defined by the United Nations.
About $14 billion (Dh51.4bn) could be provided in immediate and critical liquidity relief by official creditors alone, according to the World Bank.
“We are encouraged by the increasing number of applicants benefiting from the historic G20 Debt Service Suspension Initiative,” said Bandr Alhomaly, the Saudi G20 presidency IFA working group policy lead.
He said the initiative ensured the mobilisation of critical resources to mitigate the impact of the pandemic.
G20 nations agreed in April to a time-bound suspension of debt service payments to support efforts by poor countries to protect lives and alleviate the economic and financial burden caused by the health crisis.
The move is part of the G20’s efforts to bolster the world economy and ensure financial stability. The Centre for Strategic International Studies estimates that the G20 had disbursed $7 trillion (Dh25.7tn) in direct spending, tax relief and lending by the end of May.
Principal and interest payments were suspended from May 1 until the end of the year, under the initiative. Creditors will consider a possible extension to the debt freeze later this year.
The DSSI's term sheet does not prevent additional debt treatment for a country participating in the initiative, provided that the initiative's terms are met, the G20 said last Thursday.
“The pace of implementation of the DSSI has significantly accelerated in June, in particular with the clarification that requesting the DSSI for official bilateral creditor [support] does not oblige beneficiary countries to make the same request to private creditors, and credit rating agencies having clarified, in parallel, their position on the DSSI,” said Guillaume Chabert, French co-chairman of the G20 IFA working group.
Earlier this month, the World Bank said credit rating agencies had made it clear that the suspension of debt payments was not expected to have any implications on ratings.
Members of the G20 working group also discussed ways to restore sustainable flows of capital and enhance financial resilience through the development of domestic capital markets at the meetings this past week.
“A historic level of capital outflows has begun to let up, but uncertainty of a sudden stop still hovers around the global financial markets, calling for G20-level policy co-ordination,” said Boosung Kang, the Korean co-leader of the IFA working group.
"In the short term, the implementation of the DSSI and properly functioning global financial safety net are necessary, and in the long term, the development of domestic capital markets continues to be pursued.”
The group said it will provide an update on the accomplishment of the initiative's objectives, capital flows and domestic capital market development, to the G20 finance ministers and central bank governors during their July meeting.
