The G-7 Leaders Photo: Express UK

COVID-19: G-7 to extend debt moratorium for virus-hit, poor countries

Isola Moses | ConsumerConnect

In view of the extensive, adverse impacts of the novel Coronavirus disease (COVID-19) on several economies around the world, a Group of Seven (G-7) countries have resolved to agree to an extension of a freeze in debt payments from the world’s poorest countries struggling with the pandemic.

Agency report quoted people familiar with the discussions as saying that the backing of the club of industrialised economies, whose finance ministers are expected to meet Friday, September 25, signals a consensus within the Group of 20.

This forthcoming forum is reportedly with a much wider body that includes emerging powers such as China and Brazil.

In April 2020, the group launched an eight-month debt service suspension to help more than 70 countries.

France has publicly backed giving more relief, report stated.

G-20 Finance Ministers are set to decide in October about the length of the extension and how to include private creditors that have been reluctant to join the moratorium.

So far, 42 countries have applied for bilateral debt relief, with most refraining from demanding a waiver from private creditors out of fear they could be locked out of debt markets.

Zambia became the major exception this week after it called on bondholders to waive nearly $120 million in payments, raising fears of a wave of defaults through the continent as a decade-long debt binge unravels.

The International Monetary Fund said it would push hard for private creditors to join the waiver to give a meaningful respite for countries battered by low commodity prices and an exodus of capital.

Meanwhile, World Bank President David Malpass has also called on private creditors to do more, according to report.

In a letter to the G-20 Tuesday, the Bank wrote that any coercion to get private creditors involved would tip borrowers into default and hurt financial markets, the Institute of International Finance, a trade group that represents banks and financial institutions.

It said a case-by-case approach with a focus on sustainable debt should the next step in relief.

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