The Group of 20 nations, representing the world’s biggest economies, have agreed to extend the suspension of debt payments by an additional six months to support the most vulnerable countries in their fight against the COVID-19 pandemic.
The G-20 finance ministers and central bankers said Wednesday they would “do whatever it takes” to keep the global economy afloat as governments seek to halt the spread of coronavirus.
Officials from G-20 countries held talks via videolink to discuss how best to protect people from the economic fallout of the global health crisis.
The G-20 says the extension will provide ongoing relief for the $14bn in debt payments that would have come due at the end of the year otherwise. The decision gives developing nations until the end of June 2021 to focus spending on health care and emergency stimulus programs rather than debt repayments.
#G20 Finance Ministers and Central Bank Governors just agreed to extend the G20 Debt Service Suspension Initiative by an additional 6 months to support the most vulnerable countries in their fight against the #COVID19 pandemic. #G20SaudiArabia
— G20 Saudi Arabia (@g20org) October 14, 2020
International aid groups expressed disappointment that more debt relief isn’t being provided by extending the moratorium on debt payments for a full year or by forgiving part of the debt rather than merely suspending payments.
In a lengthy communique, they warned that women, young people and other vulnerable segments of society across the world would be the hardest hit.
Existing debts in developing countries
In response to the COVID-19 pandemic, which has upended the global economy in a matter of weeks, governments in both the developed and low-income world have intervened to soften the blow. Most have borrowed to try to limit the economic damage. Low-income countries, some with significant existing debts and facing collapsing oil prices and tourism, will be particularly hard hit.
The positions of emerging and low-income countries differ significantly. Some countries have substantial debt, but also substantial external reserves. Some countries have mostly borrowed in their own currency, while others have primarily borrowed in foreign currency.
Some have borrowed from private creditors; others have borrowed from official ones (other governments) who may show more forbearance. In general, countries that have borrowed in foreign currency from the private market are in the most immediate financial trouble many of the roughly thirty so-called frontier market countries are at high risk of default.
The COVID-19 pandemic set back work on the global tax agreement, the ministers explained. The new goal is to reach a consensus on new tax rules by mid-2021.
The ministers also welcomed a report approved by Inclusive Framework on the tax policy implications of virtual currencies and global progress implementing tax transparency standards.
They further pledged to continue to support developing countries in strengthening their tax capacity to build sustainable tax revenue bases.
Group of Twenty (G-20)
The G-20, a collection of twenty of the world’s largest economies formed in 1999, was conceived as a bloc that would bring together the most important industrialized and developing economies to discuss international economic and financial stability.
Its annual summit, a gathering of G20 leaders that debuted in 2008, has evolved into a major forum for discussing economics as well as other pressing global issues. One of the group’s most impressive achievements was its robust response to the 2008 financial crisis, but some analysts say its cohesion has since frayed.
The G-20 countries are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom, and the United States.