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Struggling countries seek G20 debt freeze extension

[LONDON] Beneficiaries of the G20 group of major economies' multi-billion dollar debt freeze, which aims to help poorer countries survive the coronavirus pandemic, called on Tuesday for the initiative to be widely extended.

The Debt Service Suspension Initiative (DSSI) has since April seen more than 40 of 73 eligible countries defer some US$5 billion in debt payments, but with no end in sight to the Covid-19 crisis, the pressure is on to do more.

World Bank President David Malpass said on Monday that only a six-month extension beyond the end of 2020 may emerge this week, rather than a year as some had hoped.

Angola's Finance Minister Vera Daves said an extension of the DSSI would be "very useful".

Speaking at an online forum organised by the International Monetary Fund (IMF) and World Bank, she added that Angola would have a conservative budget to try and keep its debt, expected to top 140 per cent of annual GDP, under control.

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At an Institute of International Finance (IIF) online panel, policymakers from Kenya and Costa Rica also expressed support for the scheme, as well as for countries like China and Russia - not currently part of the Paris Club government debt relief architecture - to provide more help.

"The desire to rope in all creditors, and particularly China and Russia, I think it is great," said Patrick Njoroge, Governor of the Central Bank of Kenya.

"China has never really been there and that has always been one of the weaknesses of the Paris Club."

World Bank chief Malpass is in favour of greater participation by China and its state banks in the G20 debt scheme, as well as private creditors around the world from banks to investment funds which have not yet given help.

Costa Rica's Central Bank President Rodrigo Cubero also said it was vital for non-Paris Club lenders to be part of the support efforts and called for more than just flexible credit lines from the likes of the IMF.

"Recognition that in most cases what is needed is actually direct budget support as opposed to balance of payments support will be critical. So I think this is where the IMF has to help,"he said.

A new World Bank study on Monday showed that among countries eligible for the G20 debt relief, external debt loads increased 9.5 per cent in 2019 to US$744 billion even before the pandemic.

With the coronavirus now savaging economies, the World Bank has warned that 150 million more people could be pushed into extreme poverty by the end of next year.


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