Officials from the Group of 20 (G20) major economies have today agreed to halt payment of debt for the world’s poorest countries during the Coronavirus pandemic, and indeed through to the end of the year. Private creditors quickly echoed this policy after the announcement was made.
Due to the fact that both principal and interest payments will be frozen for these countries, it is estimated that more than $US20 billion will be freed up for spending on health measures and responses to the Coronavirus crisis.
The debt freeze offer is available to the globe’s least-developed and poorest countries, as indexed by the United Nations and the World Bank, but they must still maintain their debt service payments to the IMF and World Bank to qualify.
The above mentioned measures are part of a global effort to stave off the impact of the market downturn seen recently by bolstering the global economy as much as possible to lessen the sting of the sizeable recession that we are currently enduring.
The G20 debt standstill offer will allow countries that qualify to immediately invest in healthcare instead of waiting to be examined on a case by case basis.
Private creditors, while publicly stating they would join the G20 in offering debt standstill, will join on a voluntary basis. Some G20 officials have stated concern that in implementing a debt freeze could lead to poorer nations using those freed funds to pay off private sector debts, and have urged the International Institute of Finance to push for private creditors to adopt the same policies that the G20 nations have just implemented.