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Samson: The World Bank calls for increased participation in the G20 debt initiative

23rd June, 2020

World Bank President David Malbas confirmed on Tuesday that the initiative to freeze the debt of the poorest countries in the world announced by the Group of Twenty is making progress, but more exemptions and greater participation of private creditors are needed

Malpas told Reuters in an interview that 35 of the 73 eligible countries are participating in the G20 initiative, which will freeze official bilateral debt service payments until the end of the year, and that more countries have expressed interest in participating

The World Bank database shows that the initiative to suspend debt service payments will provide up to $ 12 billion that countries can use to deal with the economic and health burdens of the Coronavirus pandemic.

Malpas said the pandemic had hit the global economy with a “very serious and long-term setback”, the hardest hit being the poorest countries

He added that the initiative, agreed by members of the Group of Twenty and the Paris Club of creditor nations in April, was helping the poorest countries, but more steps were needed to prevent the economic crisis from increasing poverty rates.

 He did not endorse calls by African and other countries to extend the suspension of debt payments until 2022 and cancel some debts, but he said that further steps would have to be taken

“We should look for ways to make additional debt relief available to the poorest countries, at the time when we look at the broader situation facing developing countries,” he said. He also urged the private sector to increase participation in the initiative

“It is not really reasonable that commercial creditors continue to receive debt payments and compel the poorest countries to pay them legally … after they were affected by the pandemic and the deepest economic recession since the Second World War,” he said

Some countries are reluctant to obtain these exemptions for fear that this would harm their credit rating and access to global capital markets. The President of the World Bank said that increased transparency on debt levels could pave the way for higher investment to boost future growth

The initiative is part of efforts to revitalize the global economy in light of the outbreak of the Corona virus, which is pushing the global economy towards the largest slowdown since the Great Depression of the 1930s

It coincides with widespread criticism – some from many of the G20 countries themselves – of US President Donald Trump’s decision to temporarily suspend WHO funding because of its handling of the Covid-19 pandemic, which has killed nearly half a million people so far  LINK