G20 to extend debt service suspension to poorest countries by another six months

Group is convening another meeting of finance ministers in November to assess how best to complement initiative

FILE PHOTO: Saudi Minister of Finance Mohammed al-Jadaan speaks during a media conference with Saudi Arabia's central bank governor Ahmed al-Kholifey, in Riyadh, Saudi Arabia, February 23, 2020. REUTERS/Ahmed Yosri/File Photo
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The G20 will extend debt relief for the world's poorest countries as policymakers from the biggest economies continue to adopt measures to help the global economy recover from the pandemic.

The group will review the need to further extend the Debt Service Suspension Initiative beyond these six months at the World Bank and International Monetary Fund spring meetings next year, Saudi Finance Minister Mohammed Al-Jadaan said.

Mr Al-Jadaan was speaking late on Wednesday after a meeting of the Group of 20 major economies' finance ministers and central bank governors.

"Given the scale of the Covid-19 crisis, the significant debt vulnerabilities and deteriorating outlook in many low-income countries, we recognise that debt treatments beyond the DSSI may be required on a case-by-case basis," the G20 said after the meeting.

"In this context, we agreed in principle on a 'common framework for debt treatments beyond the DSSI', which is also agreed by the Paris Club."

Mr Al-Jadaan and Saudi Arabia’s central bank governor, Ahmed Al Kholifey, chaired the talks on Wednesday.

The kingdom, the biggest Arab economy, holds the rotating presidency of the G20.

In April, the G20 agreed to a time-bound suspension of debt repayments to help poor countries ride out the pandemic.

The initiative will benefit 73 members of the International Development Association on a debt service plan with the IMF and the World Bank, and the least developed nations as defined by the UN.

Mr Al-Jadaan said 46 countries had already benefitted from this initiative.

Meanwhile, World Bank president David Malpass called for $25 billion in emergency financing for poor countries and debt relief to help them survive.

Although Mr Al-Jadaan did not specify whether the G20 would provide more monetary aid to poor countries, he said it would look to provide more support if needed.

"While DSSI deals with liquidity issues, common framework deals with solvency issues with the aim of addressing debt vulnerabilities on a case-by-case basis," he said.

"We know DSSI is a breakthrough and a much needed liquidity to these economies to redirect these resources to their people and communities to deal with the pandemic."

The group is convening another meeting of finance ministers in November to assess how best to complement the DSSI, Mr Al-Jadaan said.

The coronavirus pandemic, which grounded flights and disrupted supply chains, has tipped the global economy into the deepest recession since the Great Depression.

This week, the IMF said the world economy would contract by 4.4 per cent this year, slightly better than the 4.9 per cent contraction the fund projected in June.

Emerging market and developing countries without the fiscal and monetary resources of advanced economies are expected to record a big decline in economic output this year and in 2021.

Mena economies are projected to shrink by an average of 5 per cent this year and expand by 3.2 per cent next year.

"The Saudi economy is contracting like any other economy," Mr Al Kholifey said.

"It contracted 1 per cent in the first quarter and 7 per cent in the second quarter.

"The peak of the crisis was the second quarter and we are hoping [the next quarter] is going to be less severe. We see some positive numbers."