World Bank’s Malpass says G20 could agree to debt relief extension of just six months
WASHINGTON (Reuters) – Some G20 creditor countries are reluctant to expand and extend coronavirus-related debt service relief for the world’s poorest countries by a year, so a six-month compromise could emerge this week, World Bank President David Malpass said Monday.
Malpass, speaking to reporters at the start of the virtual annual meetings of the World Bank and the International Monetary Fund, said the G20 debt working groups had failed to reach an agreement on the two institutions’ efforts to a one-year extension of the G20 Debt Service Suspension Initiative (DSSI).
“I think there can be compromise language that can be a six-month extension (and) it can be renewed depending on debt sustainability,” Malpass said.
Finance ministers and central bank governors from major G20 economies are due to meet via video conference on Wednesday. In May, they launched an initiative to allow poor countries to suspend payments on official bilateral debt owed to G20 creditor nations until the end of 2020, which Malpass says has so far freed up $5 billion. dollars to strengthen coronavirus responses.
Malpass and IMF Managing Director Kristalina Georgieva have warned that much more debt relief is needed for poor and middle-income countries, including principal reduction, to avoid a “lost decade” as the pandemic destroys economic activity.
Malpass said the two institutions would come up with a joint action plan to reduce the debt stock of poor countries whose debt is unsustainable.
But he said debtor countries were too “deferential” to creditor countries and needed to demand a lower debt burden more forcefully. “That dialogue has not yet been as strong as I think is necessary to move this process forward.”
A new World Bank debt study released on Monday showed that among countries eligible for the G20 debt relief program, external debt soared 9.5% in 2019 to $744 billion before the pandemic does not strike.
The official bilateral debt of the poorest countries to G20 countries reached $178 billion in 2019, with 63% of the total owed to China. The study indicates that China’s share of this debt stood at 45% in 2013, the year Beijing launched its global Belt and Road infrastructure campaign.
Malpass said the debt service suspension initiative has accelerated more slowly than expected because “not all creditors are fully participating,” including China.
He said he wanted to see China’s participation in the debt service suspension initiative expanded to more state-sponsored creditors, adding that many of those already participating had no deferred repayment of the principal but still received interest.
Reporting by David Lawder in Washington; Editing by Richard Chang and Matthew Lewis