The G20 commits to a moratorium on the debt of poor countries

Text by: Aabla Jounaïdi Follow

As of May 1, 2020, all interest on the debt that should have been paid by the 77 developing states, assisted by the World Bank, will remain in their coffers. And that for six months ... but six months renewable. A measure taken so that each State can face the consequences of the coronavirus pandemic.

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According to Bruno Le Maire, the French Minister of Finance, $ 14 billion will be temporarily saved and left at the disposal of the 77 developing states, after the decision made by ministers and central bankers of the G20 group on Wednesday, April 15. This sum represents the interest on the debt of these countries, which will not have to pay it over a period of six months (plus six months renewable).

This boost is given so that these states can respond to the health, economic and social emergency caused by the coronavirus pandemic. Moreover, the beneficiary States will have to commit themselves to allocate these sums well to their emergency expenses, and not for example to reimburse other creditors. The International Monetary Fund (IMF) and the World Bank must ensure this.

In any case, it is not up to the efforts hoped for by several States, particularly in Africa. France, and several African states had declared themselves in favor of outright cancellation of bilateral debts rather than their deferral.

► Read also: Emmanuel Macron on RFI: "We owe solidarity to Africa" ​​in the face of the coronavirus

France still welcomes "historic" decisions

Paris believes that this is a first step which may give rise to cancellation on a case-by-case basis. In any case, it will necessarily be in a multilateral framework. By the end of 2020, the international financial institutions will have the task of ensuring the state of the finances of these countries in difficulty, in particular the sustainability of their debts.

The moment is historic for Paris too because such coordination between the States is rare. At the French Ministry of Finance, whose director of the treasury chairs the Paris Club (this informal group of creditor states), we recall that this agreement with the G20 countries is a first in 20 years. And this while diplomatic tensions are high, especially between China and the United States. We can still see this in the case of the WHO, deprived of funding by Washington against the backdrop of Sino-American rivalry.

► Read also : Moratorium on the debt of African countries: on the continent, opinions are divided

What about the private actors who hold a significant share of the debts of poor countries ?

For private actors, whether businesses, fund managers or small holders, $ 8 billion is at stake. In the final communiqué of the G20 finance ministers, an appeal is always launched for them to join the State efforts. Even the Institute of International Finance (IIF), an organization representing 450 groups in the financial industry, responded to this call. But if there is hope, it is actually very difficult to force them, at the risk of distorting the market. It would therefore be a long and more technically complex process to launch.

IMF resources strengthened to respond to the emergency

The IMF, which predicted Tuesday a historic recession in Africa and a global recession of 3% this year, sees its arsenal grow. It will create new lines of liquidity intended to meet the short-term needs of the States. Typically, we are thinking here of countries that depend on exports of raw materials, whose prices collapse with world demand for hydrocarbons, cotton or others. Now, the IMF, through its various tools, can mobilize 1,000 billion dollars.

The American David Malpass, director of the World Bank, praised him for the temporary support for state budgets ... without, however, engaging his organization in the efforts of the debt moratorium as hoped. On the other hand, the World Bank intends to mobilize $ 240 billion for its various projects to fight against the coronavirus. It will discuss this Friday April 17 with its institutional partners but also with civil society. Civil society which will not fail, during the traditional spring meetings, to stress the importance of canceling the debts of the poorest states.

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• Coronavirus
• G20
• Economic crisis
• world Bank
• IMF
• Finance
• Africa

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