G-20 suspends poor nations’ debt payments for six more months

Updated 15 Oct 2020

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The G20 has decided to extend its debt relief to help poor countries fight the Covid-19 pandemic by another six months. — AFP/File
The G20 has decided to extend its debt relief to help poor countries fight the Covid-19 pandemic by another six months. — AFP/File

KARACHI: The G20 has decided to extend its debt relief to help poor countries fight the Covid-19 pandemic by another six months.

Originally approved in May 2020, the Debt Service Suspension Initiative (DSSI) was supposed to run till December 2020. Pakistan was approved under the initiative and $1.8 billion of its external debt service payments falling due till December were rescheduled under it.

With the new announcement made on Wednesday, all debt service payments owed to bilateral creditors from December to June 2021 will also be rescheduled.

“In light of the continued liquidity pressure, while progressively addressing debt vulnerabilities, we agreed to extend the DSSI by six months, and to examine by the time of the 2021 IMF/WBG Spring Meetings if the economic and financial situation requires to extend further the DSSI by another 6 months,” said the communique issued by the G20 finance ministers and central bank governors after the meeting on Wednesday.

The group said they find that the initiative is “significantly facilitating higher pandemic-related spending” in those countries that have availed it.

More than 70 countries participated in the initiative since it was launched in May. According to data on the DSSI page of the World Bank website, Pakistan is estimated to have saved $2.706bn in debt service payments under the initiative. The data is updated till Oct 6, 2020 and “based on monthly projections for May-December 2020, based on end-2018 public and publicly guaranteed debt outstanding and disbursed”.

Estimates are not available for the savings that the extension till June 2021 will bring. The money saved this year from the debt service payments will be repaid later in a few years time once the initiative expires.

Published in Dawn, October 15th, 2020