Last night, Finance Ministers of 20 of the world’s biggest economies (‘the G20’) announced a six-month extension to their Debt Suspension Service Initiative (DSSI). The G20 also announced a common framework for debt treatments beyond the DSSI, the details of which will be announced next month.
The G20 fell far short of the UN’s call for USD1 trillion of urgent debt relief to be extended to developing countries. ActionAid and Jubilee Australia described the G20’s measures as “leaving developing countries to fend for themselves at this time of urgent need.”
Executive Director of the Jubilee Australia Research Centre, Luke Fletcher said, “The G20 is kicking the can down the road yet again, and as a result, countries in the Global South are hanging by a thread.
“Countries in the Pacific have been hit hard by the economic impacts of COVID-19, which has compounded unemployment woes and could increase the number of people living in poverty for the first time in two decades according to the World Bank.[1] Many of our Pacific neighbours were already under financial pressure from debt distress and from the effects of climate change even before the COVID crisis hit. They are now also under further financial strains from the economic shutdowns and loss of trade and tourism as a result of the COVID crisis,” Fletcher said.
“Yet existing debt relief measures such as the DSSI are clearly insufficient given the scale of the problem. The G20 needs to adopt a more comprehensive and radical approach to the debt crisis, by cancelling all principal, interest, and charges on all debt due by 2022, as well as promote a long-term solution to the debt crisis that includes all creditors.”
ActionAid Australia’s Head of Policy and Campaigns, Katherine Tu said the G20’s failure to cancel debt will lead to a “lost decade” of development and advancement in gender equality.
“We are in the midst of the largest humanitarian crisis the world has ever seen, yet the G20 countries have granted only a brief extension to an already limited debt suspension initiative. Today’s announcement means that developing countries only get a brief reprieve from bilateral debt payments, while multilateral and private creditors continue collecting billions in debt servicing from poor countries hard-hit by COVID-19,” Tu said.
“The crisis is reaching a tipping point. As the COVID-19 pandemic persists, countries like the Gambia are being forced to spend over half of all government revenue on debt payments. That’s three times more than it spends on health and education combined. This is taking a disproportionate toll on women and girls in all regions of the world.
“Women are overrepresented among those who’ve been left without jobs and income as a result of the pandemic, and ActionAid research also shows a huge spike in violence against women since lockdowns began.
“The subsequent economic fallout could set gender equality back by decades. The G20 needs to show leadership by cancelling, not suspending, unsustainable debt that is preventing countries from investing in gender-responsive services so women don’t get left behind in this crisis.”
Tu said the G20 missed a crucial opportunity to cancel debt and to expand debt relief measures to include multilateral and private lenders. The G20 indicated the common framework for debt reduction will require the participation of private lenders on a case-by-case basis but gave no further details.
“G20 governments must move beyond this piecemeal approach to debt relief and establish a comprehensive mechanism for debt relief and cancellation under the auspice of the United Nations to ensure there is a fair and just resolution to the growing debt crisis,” Tu said.
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Notes to editors:
The Debt Suspension Service Initiative suspends principal and interest payments on debt due from 73 of the least developed countries to bilateral government lenders. The initiative initially ran between 1 May and 31 December 2020. It has now been extended to 30 June 2021. The timeframe for repayment of suspended debt payments has also now been extended from 4 to 6 years.
Multilateral and private lenders are not included in this initiative. For the period of May-December 2020, if all eligible payments had been suspended, developing countries would still have had to pay USD9.47 billion to multilateral lenders and USD11.54 billion to private creditors.
[1] https://blogs.worldbank.org/opendata/projecting-global-extreme-poverty-2030-how-close-are-we-world-banks-3-goal