İrem UZUN -TDO- On Wednesday, Finance officials from the group of 20 major economies agreed to suspend debt service payments for the world's poorest countries from May 1 until the end of the year. The moves to freeze both principal repayments and interest payments will free up more than $20 billion for the countries to spend on their health systems and help tackle the coronavirus pandemic, Saudi Finance Minister Mohammed al-Jadaan stated.
The International Monetary Fund and World Bank had been calling on the governments to provide six months of debt relief to the countries most in need, and finance ministers from the Group of Seven advanced economies agreed to do so on Tuesday providing the G20, including China and Russia, was in favor. "This is a powerful, fast-acting initiative that will do much to safeguard the lives and livelihoods of millions of the most vulnerable people," the leaders of the IMF and World Bank said in a joint statement. The IMF on Monday approved a six month-long standstill on debt payments from 25 nations, mostly in Africa.
The Institute of International Finance, which represents 450 banks, hedge funds and other global financial firms, said it would recommend that private sector creditors voluntarily grant similar debt relief to the poorest countries, if they requested it. The UK-based charity, The Jubilee Debt, estimates that the delay will cover $12bn of payments. But it is only a delay and the campaign group understands that the payments will instead have to be made between 2022 and 2024, along with interest accrued in the meantime. Thus, the charity wants to see legal changes to ensure that private creditors cannot use the courts to sue developing countries if they miss payments.