G20 must move forward on debt restructuring program – EURACTIV.com

European Council President Charles Michel on Friday (20 November) called on G20 leaders to create “a new model of sustainable finance” to avoid sovereign defaults in the wake of the COVID-19 crisis.

“In our view, this is not enough,” Michel said of the G20 Debt Service Suspension Initiative, which suspended debt payments between governments, ahead of the leaders’ summit. G20 this weekend.

While 43 countries have joined the DSSI, private creditors have so far resisted their involvement, and the G20 lacks a mechanism to force them.

“All creditors must do their part. No country should be perceived as having a free ride. Multilateral means everyone is on board. We need a new sustainable finance model, especially in Africa, to break the cycle of over-indebtedness,” Michel said.

Michel added that finance and development, in addition to the COVID-19 pandemic, would be on the agenda of an EU-African Union meeting in December.

African states alone face a financing gap of $345 billion through 2023, International Monetary Fund Managing Director Kristalina Georgieva warned earlier this month.

Speaking at Friday’s meeting of G20 finance ministers and central bank governors, World Bank President David Malpass said countries must move forward with “deep and permanent relief”. debt” and that some may need to make legislative changes to push private sector creditors to support sovereign debt. restructuring of the debt of countries in difficulty.

“Major jurisdictions may need to consider legislative changes to support faster progress if private creditors are unable to move forward on their own,” Malpass said, referring to the bank’s call for require public creditor institutions to disclose debt contracts and enter into refinancing agreements. Public.

The public debt burden in Europe and around the world has increased dramatically due to the combination of the recession and emergency public spending programs to support businesses and workers whose trade has been severely affected by the restrictions put in place. in place to control the spread of COVID-19.

However, developing countries, although they generally have lower debt-to-GDP ratios than European and other rich countries, are more vulnerable to widening credit spreads.

Earlier this week, Zambia became the first African country to default on debt repayments since the COVID-19 pandemic and a handful of countries in Africa and beyond are set to face debt distress or a default without an ambitious restructuring plan.

The G20 has begun what is expected to be a lengthy process of developing guidelines on when debt restructuring can be allowed. The final plan will likely require governments to present credible national stimulus plans – endorsed by the IMF – and demonstrate sufficient transparency to be eligible.

At the G20 summit, the EU should also push the international community for greater commitment to providing universal access to COVID-19 vaccines, European Commission President Ursula von der Leyen has said.

The goal is to purchase 2 billion doses of COVID-19 vaccine to be made available to 92 low- and middle-income countries, at an estimated cost of $5 billion.

The EU will also host a global health summit next year under Italy’s G20 Presidency.

[Edited by Sam Morgan]

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