EU part of group calling for relaxation of debt relief rules –

The EU, along with a group of countries, is pushing for a relaxation of the definition of debt relief in the latest round of OECD Development Assistance Committee (DAC) negotiations Thursday, June 25 , according to EURACTIV.

The DAC sets the rules for defining and counting international development assistance within the framework of the 0.7% of gross national income (GNI) target agreed by donor countries, including EU member states .

A handful of countries that give most of their aid in the form of loans, including France and Germany, as well as the EU, are among those pushing hardest for changes that could allow donor countries to claim incentives both to offer riskier loans and then to restructure or write them off as debt relief.

Loans currently represent around 16% of total bilateral ODA and, until 2014, were calculated on a cash basis, meaning that the full face value of a loan was included. Under the current methodology, only the “grant portion” – the amount the loan provider distributes by lending below market rates – counts as ODA.

The DAC is pushing for an agreement on the rules this summer, with a further meeting scheduled for the end of July, according to EURACTIV.

The issue of accounting for debt relief is particularly relevant after the G20 agreed in April to defer debt repayments due to 2020, a program worth up to $20 billion, in a bid to to limit the economic damage of the coronavirus pandemic on developing countries and allow them to finance their own recovery plans.

Although debt relief talks and possible private sector involvement in debt relief have progressed slowly since then, insiders expect additional debt relief measures to be forthcoming. announced this year.

Last week, Chinese President Xi Jinping announced that China would cancel interest-free loans to African countries that were due to mature by the end of 2020, at the extraordinary China-Africa summit last week.

In April, DAC members vowed they would “strive to protect aid budgets”. However, civil society activists expect that since most EU countries and other DAC members are expected to post recessions of 5-10% in 2020, this will significantly reduce government budgets. aid.

They fear that further relaxation of debt relief rules could be used by donor countries to artificially inflate aid budgets.

“What we urgently need now to help developing countries overcome the massive crisis triggered by COVID-19 is new financial resources without additional conditions,” said Jan van de Poel, Policy and advocacy for the European Network on Debt and Development (Eurodad), told EURACTIV.

“If donors agree to generous rules for reporting on debt relief, it would inflate aid levels and reduce pressure to increase much-needed spending that helps eradicate poverty and fight poverty.” inequality. It remains essential to set the rules in a way that rewards donors who choose to step in with much-needed grants instead of loans that will have to be repaid,” he added.

[Edited by Sam Morgan]

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