The implementation of the debt service moratorium until the end of 2020 for the poorest countries is being accelerated to help these countries cope with the impact of the Covid-19 pandemic.
“As of 28 May, 36 applications had been received at the G20, including 31 at the Paris Club. Of these 31 requests, 12 were the subject of contracts signed yesterday with debtor countries”, announced the President of the Paris Club, Odile Renaud-Basso, at a press briefing on Wednesday 10 June.
Pakistan, Ethiopia, Burkina Faso, Niger, Chad, Cameroon, Republic of the Congo, Nepal, Grenada and Dominica are among the signatories.
Under the Debt Service Suspension Initiative (DSSI) roadmap, also endorsed by the G20, these countries were deemed eligible for the initiative. They committed to use the freed resources to increase spending to mitigate the health, economic and social impact of the Covid-19 pandemic crisis and to call on all other official bilateral creditors to treat debt service in accordance with the roadmap.
For these 12 countries, the total amount of 2020 maturities carried forward to date is approximately $1.1 billion, plus the carry-over of pre-existing arrears. €1.1 billion due to creditors will be repaid between 2022 and 2024.
19 other cases are in progress.
“The decisions taken in April are now being implemented. We’re in the acceleration phase. Rarely has there been such a rapid deployment by the Paris Club and G20 creditors”, says Ms Renaud-Basso.
Other requests may follow from countries that were reluctant initially. The rating agencies have stated that requesting the benefit of the moratorium has no effect on the rating. “It’s like refinancing repayments. New financing is not a sign of weak cash flow”, explained Ms Renaud-Basso.
Zimbabwe, Sudan, Eritrea and Syria, which are in arrears with payments to financial institutions, are not eligible.
Asked about the possibility of a debt write-off in October, Ms Renaud-Basso said that in October there will be a better identification of which countries will need debt sustainability treatment. According to her, “there will be the option of extending the moratorium and it may be said that for some countries more is needed, real debt relief”.
She considered that the extension of the initiative – a possible extension of 6 months or 1 year – could be decided at the G20 summit in November.
The Paris Club comprises 22 creditor countries (Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, the Netherlands, Spain, Sweden, Australia, Brazil, Canada, Korea, Israel, Japan, Norway, the United Kingdom, Russia, Switzerland and the United States). (Original version in French by Aminata Niang)