Saudi Arabia has led the G20 group to agree on debt suspension for world’s poorest countries. Financial officials of the Group of 20 major economies said that they have agreed on a coordinated approach for a suspension of debt service payments for the world’s poorest countries starting on May 1 until the end of the year.
Chairing the virtual meeting, Saudi Finance Minister Mohammed Al-Jadaan said that the G20 has already poured more than $7 trillion into the global economy to support businesses and stem job losses. The finance ministers and central bank governors of the G20 group of the world’s largest economies held their virtual meeting on Wednesday to further address the global challenges presented by the COVID-19 pandemic, the G20 said on Twitter.
Commenting on the debt suspension, Saudi Minister Al-Jadaan said the group would provide $20 billion in immediate liquidity. The decision to suspend both principal repayments and interest payments affects all the International Development Association (IDA) countries that are currently on debt service to the International Monetary Fund and the World Bank, and all least developed countries as defined by the United Nations that are currently on any debt service to the IMF and the World Bank.
The move is part of efforts to provide stimulus to the global economy amid the new coronavirus outbreak, which is pushing the global economy into the steepest downturn since the Great Depression. “We agreed on a coordinated approach with a common term sheet providing the key features for this debt service suspension initiative, which is also agreed by the Paris Club,” the G20 said in a joint statement.
They also called on private creditors to participate in the initiative “on comparable terms.” International Monetary Fund Managing Director Kristalina Georgieva and World Bank David Malpass on Wednesday praised a new G20 debt relief agreement that suspends bilateral debt service payments by poor countries. A source familiar with a G20 meeting of finance ministers and central bank governors said the debt service suspension would run from May 1 through Dec. 31, with an option for renewal in 2021.
Georgieva, in a statement to a meeting of G20 leaders also said the IMF was “urgently” seeking some $18 billion in new resources for the Fund’s Poverty Reduction and Growth Trust for poor countries and was exploring how the use of special drawing rights could aid this effort. Al-Jadaan, who chaired the meeting, said the G20 had delivered on two concrete actions.
“First, delivering a joint G20 action plan in response to COVID-19 in order to advance international economic cooperation as we navigate this crisis and look ahead to a robust and sustained global economic recovery,” he said. “And second, providing international financial assistance to the most vulnerable countries.” The debt suspension will last until the end of the year but creditors will consider a possible extension during 2020, the G20 said. Al-Jadaan stated that the coronavirus pandemic has taken a “great toll” and “extraordinary uncertainty” still remains about its depth.
Speaking during a summit for finance ministers of the Group of 20 major economies, he added that the group is “determined to spare no efforts individually, collectively, to overcome the pandemic, safeguard jobs, incomes and ensure the resilience of financial systems.” “The G20 action plan aims to prevent a liquidity crisis from turning into a solvency crisis,” he remarked. Saudi Arabia is currently chairing the G20 presidency.
He further said that he was optimistic that “by continuing to work together, we will overcome the COVID-19 crisis and come out of this with strong recovery and prepared to address any future crisis.” G20 members have injected over $7 trillion into the global economy to protect jobs, businesses and economies, he stated.
Asked about US-China tensions, he said he was “really grateful to G20 members and other stakeholders. We have not seen any political issues, but we have seen very clear solidarity and commitment to work through the G20 initiative.” The G20 presidency is coordinating with the International Monetary Fund, doubling and in some cases tripling some of the liquidity pool to emerging markets and poor countries, he added. Most of these countries have already been notified.
Moreover, the G20 welcomed the recent OPEC+ agreement to ensure oil market stability. Al-Jadaan remarked that he believes that the oil GDP of the region and including Saudi Arabia will be reduced. The minister added he was not happy with oil prices, but “we need to make sure that the energy market is balanced.”