Coronavirus In order not to weaken the poorest states in their fight against the pandemic, the G20 finance ministers decided to interrupt debt service for a year.
The finance ministers and central bankers of the G20 group gave their approval on Wednesday to an immediate and one-year suspension of the debt of the poorest countries. They are particularly weakened by the crisis caused by the coronavirus pandemic.
“This suspension of debt service takes effect immediately,” said Saudi finance minister Mohammed al-Jadaan during a virtual press conference following a G20 meeting.
“This is a really important announcement, which means that poor countries do not need to worry about meeting their deadlines over the next 12 months,” he added, adding that the moratorium would free up $ 20 billion in cash, which can be used to fight the pandemic in these countries with limited resources and fragile infrastructure.
He also welcomed the “clear commitment” of the stakeholders.
“This is a powerful initiative (…) that will go a long way in protecting the lives and livelihoods of millions of the most vulnerable,” said Kristalina Georgieva and David Malpass, Fund Managing Director respectively, in a joint statement. international currency and president of the World Bank.
The two Washington institutions “will act quickly to respond to the G20’s request to support this action by working closely with these countries,” they added. The IMF and the World Bank have been defending this idea for several weeks. And the Fund had approved Monday a moratorium on debt repayments for 25 countries, most located in Africa.
The temporary suspension of debt service to the poorest countries by the G20 constitutes an “act of international solidarity of historic significance”, said German Finance Minister Olaf Scholz on Wednesday.
“We are thus giving the countries concerned great financial leeway to invest in the health protection of their populations, immediately and without time-consuming examinations on a case-by-case basis,” he commented.
On Tuesday, the G7 said it was in favor of such an initiative to help these countries cope with the health and economic impacts of the pandemic due to the new coronavirus, but on condition of receiving the approval of the G20.
The ministers and central banks of the twenty wealthiest economies in the world said in a statement that the countries had “agreed on a coordinated approach with a common timetable providing the main characteristics of this initiative (…) which has also been approved by the Paris Club ”. They also urged private creditors to participate in the initiative.
Exceptional time, exceptional action
“We are determined to spare no effort to protect human lives,” said Mohammed al-Jadaan.
In this unprecedented period, we must support the global economy as much as possible and ensure the resilience of the financial system.
“We must continue our efforts and amplify them,” also said the Saudi minister, while governments have already spent thousands of billions of dollars to stem the impact of the pandemic, which is crippling whole swathes of the world economy. .
Covid-19 has infected more than two million people worldwide. Governments have resolved to confine their populations, shut down non-essential businesses and drastically reduce air traffic.
The IMF warned on Tuesday that the new coronavirus will cause the worst economic recession this year since the Great Depression of the 1930s.
Global GDP will contract by 3% and perhaps even more if the pandemic is not stopped at the end of June and if containment measures are to continue in the second half of this year.
This “Great Lockdown”, as the IMF called it, will cost the world economy $ 9 trillion in 2020 and 2021, “more than the economies of Japan and Germany combined” , said the chief economist of the institution Gita Gopinath.
Eighteen European and African heads of state had already called for debt relief and a stimulus package of around $ 100 billion for the African continent. “In these exceptional times, we need exceptional action,” Kristalina Georgieva insisted on Wednesday during a virtual press conference.