The G20 is preparing a limited extension of debt relief for the poorest nations

The G20 is preparing a limited extension of debt relief for the poorest nations

The G20 group of rich nations is preparing to extend its debt relief offer for the world's poorest countries until next year, but is increasingly criticized for the growing ambition of the deepening crisis in emerging economies.

The G20 ministers will meet on Wednesday during this week's annual IMF and World Bank meetings. They are expected to announce a six-month extension of the Group's Debt Service Suspension Initiative (DSSI), which allows 73 eligible countries to apply to G20 governments and G20 governments, with their policy banks postponing debt repayments due this year and spreading them among four Years.

The original initiative was announced as the pandemic hit the world this spring to provide short-term relief to poor countries struggling over the immediate health, social and economic costs.

However, if this is confirmed, the extension will be less than requested by the beneficiary countries.

At a meeting earlier this month between the UN Economic Commission for Africa, the Institute for International Finance, which represents private sector creditors, and a group of African finance ministers called for the DSSI to be extended until the end of 2021.

The G20 has also been criticized for neglecting the views of debtor countries.

A statement released after the meeting said: "All stakeholders, including debtor countries and the private sector, should have a seat at the table and their views must be taken into account."

Stephanie Blankenburg, Head of Debt and Development Finance at the UN Conference on Trade and Development, said: “In the G20 there is an agreement between the advanced and developing countries to only represent the interests of the creditors. There is no talk at all about how the debtor countries could get their proposals. "

In particular, she criticized a separate G20 plan for poor countries in debt distress, which will consider cuts and write-offs on a case-by-case basis over the next year.

The exemption of the G20 countries depends on debtor countries seeking equal treatment of private creditors, including commercial banks and bondholders.

Ms. Blankenburg said: "This is an enormous burden for the eligible developing countries, which are usually small and poor."

David Malpass, President of the World Bank, has also criticized the G20's efforts.

On Tuesday he said that "the G20 is a forum primarily for creditors and has been reluctant to move on the broader issue (debt relief)".

"Bilateral creditors are trying to get as many repayments as possible," he said. Mr Malpass has repeatedly criticized G20 members for not fully participating in the initiative.

According to the IMF, 44 countries have applied to participate in the DSSI and postponed repayments by about $ 5.3 billion this year – less than half of the World Bank's estimated potential savings of $ 11.5 billion.

The deferred amount is roughly one-tenth the tax cost of the pandemic across the 44 participating countries this year, which the IMF estimates at 2.2 percent of gross domestic product, or about $ 54 billion.

Of the 44 countries that have used the DSSI, only three have requested comparable treatment from private creditors, and no agreements have yet been signed, according to the IMF.

Mr. Malpass also criticized China's partial involvement in the DSSI. Some Chinese creditors had postponed the principal payments, but continued to take interest payments, with the deferred debt still bearing interest, "thus increasing rather than relieving the debt burden of poor countries," he said.

China has become the largest lender to many of the world's poor countries in recent years. World Bank data released this week shows that their share of the debt of the 73 countries in the DSSI rose from 45 percent in 2013 to 63 percent at the end of last year, when total debt was $ 73,744 billion.

China has been criticized for treating its major political banks as commercial rather than public lenders, which means that they have a choice of whether to participate in the DSSI. China says it is fully involved in the DSSI and has provided almost half of the facilitations negotiated so far this year.