Data from the World Bank reveals that the world’s poorest countries could save up to $12 billion, which they owe to sovereign nations and other creditors this year through their participation in a debt relief program.
However, the savings under the COVID-19-linked Debt Service Suspension Initiative (DSSI) will only be short-term, seeing that the initiative provides for debt relief through the end of 2020. It only postpones those payments until a later date but does not cancel them outrightly.
Angola the Biggest Winner in Debt Relief
Nevertheless, Angola is will be the biggest winner in the $12 billion G-20 debt relief plan, saving up to $3.4 billion. This represents about 28% of the total $12 billion estimated by the International Monetary Fund (IMF), and the World Bank.
The World Bank reports that by the end of last year, Chinese lenders accounted for 45% of Angola’s external debt, translating to $22.4 billion. China alone accounts for $3 billion of the amount Angola owes to the G-20.
Reuters reports that the second-largest saver among eligible DSSI countries would be Pakistan, with $2.4 billion, followed by Kenya with $802 million.
In terms of savings compared with the gross domestic product (GDP), Bhutan would reap the most benefits from the debt relief plan with 7.3% of GDP savings, followed by Angola at 3.7% and Djibouti at 2.5%.
The DSSI is backed by the G-20, the World Bank, the IMF and the Paris Club of sovereign lenders.
Reuters notes, ” The Jubilee Debt Campaign has estimated the cancellation of poor countries’ debt payments, including to private creditors, would free over $25 billion for the countries this year, or $50 billion if extended through 2021.”
In April this year, officials from the G20 countries (Group of 20 major economies) announced plans to suspend both the principal repayments and interest payments on loans for the world’s poorest countries, lasting up to the end of 2020. The move was aimed at releasing more than $20 billion for the underprivileged countries to use in fighting the global coronavirus pandemic.
The move also garnered support from the Paris Club of creditors, which in late March canceled 67% of Somalia’s debt, translating to $1.4 billion. However, the debt relief applies to only those countries that are current in their debt service payments to the World Bank and the IMF.
The International Institute of Finance also reported that private creditors would also roll over or refinance $8 billion of the debt to the poorest countries.
The G20 is an international forum for the governments and central bank governors from 19 countries and the European Union (EU). In total, the G20 economies account for around 90% of the gross world product (GWP), 80% of world trade, two-thirds of the world population, and almost half of the world land area.
See Also:
