The financial leaders from the biggest economies, Group 20 (G20) have pledged to extend debt relief for the world’s poorest countries and continue to take measures to support the global economy recover from the pandemic.
The G20 has agreed to further re-consider the need of extending the Debt Service Suspension Initiative (DSSI) beyond these six months at the World Bank and International Monetary Fund (IMF) spring meetings next year, said Saudi Finance Minister Mohammed Al-Jadaan.
“Given the scale of the COVID-19 crisis, the significant debt vulnerabilities and deteriorating outlook in many low-income countries, we recognize that debt treatments beyond the DSSI may be required on a case-by-case basis and agreed on a common framework,” the G20 said after the meeting.
The G20 finance ministers and central bank governors meeting was chaired by Mr. Al-Jadaan and Saudi Arabia’s central bank governor Ahmed Al Kholifey.
In April, the G20 countries came to an agreement to support the poor countries with a time-bound suspension of debt repayments.
This plan from the IMF and World Bank is estimated to benefit about 73 International Development Association members along with the least developed nations as defined by the UN. Since the program was initiated about 46 countries have gained from it.
Meanwhile, World Bank president David Malpass has announced a $25 billion emergency finance backing for poor countries and a debt relief.
“The recession in advanced economies is less severe than had been feared, but in most developing economies, it has become a depression, especially for the poorest,” said Mr. Malpass.
Even though Mr. Al-Jadaan did not mention if the Group would provide funding to support the poor countries, he said if required G20 will give more help and in November a meeting of Finance ministers will be hosted to evaluate the best working procedures for DCCI.
“While DSSI deals with liquidity issues, a common framework deals with solvency issues with the aim of addressing debt vulnerabilities on a case-by-case basis. We know it is a breakthrough and much-needed liquidity to these economies to redirect these resources to their people and communities to deal with the pandemic.”
The pandemic has pushed the global economy into the deepest recession since the Great Depression. But early this week, the IMF declared the global economy will shrink by 4.4 percent this year which is slightly better than the June prediction of 4.9 percent.
“The Saudi economy is contracting like any other economy. It contracted 1 percent in the first quarter and 7 percent in the second quarter. The peak of the crisis was the second quarter and we are hoping the next quarter is going to be less severe. We see some positive numbers,” says Mr. Al Kholifey.
The Middle East and North Africa (MENA) region economies are estimated to contract by 5 percent this year and expand by 3.2 percent next year.
The emerging market and developing countries without financial support from advanced economies are expected to record a huge decline in economic output this year and 2021.
The Group of Twenty (G20) is an international forum of governments and central bank governors from 19 countries and European Union (EU). Since its formulation in 1999 the group has discussed on financial and socioeconomic issues. G20 members represent 80 percent of the global economic output, two third of world’s population and three quarters of international trade.