Finance officials from the Group of 20 major economies have agreed to suspend debt service payments for the world’s poorest countries through the end of the year, a move quickly matched by a group of hundreds of private creditors.

The actions to freeze both principal repayments and interest payments will free up more than $US20 billion ($A32 billion) for the countries to spend on improving their health systems and fighting the coronavirus pandemic, Saudi Finance Minister Mohammed al-Jadaan told reporters after a virtual meeting of G20 finance officials on Wednesday.

The debt standstill offer is open to the world’s poorest and least-developed countries, as defined by the World Bank and the United Nations, as long as they are current in their debt service payments to the World Bank and the IMF.

The initiative, backed by the Paris Club of creditors, is part of globally co-ordinated efforts to bolster the global economy which is facing the deepest recession since the Great Depression of the 1930s due to the pandemic.

German Finance Minister Olaf Scholz called the move “an act of international solidarity with a historical dimension,” adding it would let the countries invest in healthcare “immediately and without time-consuming case-by-case examination”.

Private creditors will join the debt relief effort on a voluntary basis, said the International Institute of Finance which represents 450 banks, hedge funds and other global financial firms.

That is critical since countries had been reluctant to offer debt relief if countries could use the freed funds to service private-sector debts.

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