G20 must work harder on debt relief for poorer countries
Save the Children welcomes the G20’s efforts to respond to the economic crisis caused by the COVID-19 pandemic, including vital support for the world’s poorest countries.
However, with 35 low-and-middle-income countries continuing to spend more on debt payments than on healthcare for their people, the organisation remains extremely concerned about the lack of debt relief for countries that so desperately need it. Every day without action means lost lives and futures for children who have borne the brunt of the crisis.
G20 debt initiatives established after the COVID-19 crisis have helped several countries to use money that was owed to creditors for their public purse – instead of paying off their debt, it can be spent on critical education, healthcare, nutrition and livelihoods support for the poorest children and their families.
The G20 decided today to extend the Debt Service Suspension Initiative (DSSI) for the final time, until the end of this year. That is helpful, but it does not go far enough. The end of the initiative should be assessed based on needs, not an arbitrary point in time. Given the financing gap in low-income countries there is an urgent need to provide a longer-term extension until at least the end of 2022.
Greater progress is also needed on debt restructuring, which offers potential for longer term relief than DSSI provides. Months have passed since the initial announcement of the Common Framework for Debt Treatments, with only Chad so far going through the application process. The ongoing lack of transparency around the Framework is highly problematic and must be addressed to ensure accountability of all actors involved.
Both these G20 initiatives are doomed to fail unless private creditors join, something which they continue to show no willingness to do. The G20 must be more proactive in bringing private creditors to the negotiating table, including considering options to legislate.
The IMF today highlighted the stark crisis that low-income countries are facing, with limited access to finance and little scope to raise revenue, and called for urgent action. The G20 has promised to ‘deploy all tools to help low-income countries’, but the detail in today’s communique falls far short of that ambition.
For any questions, please contact Rik Goverde (firstname.lastname@example.org)