G20 and G7 should push private creditors to join debt relief efforts

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By Andrea Shalal

WASHINGTON, March 29 (Reuters) – World Bank President David Malpass on Monday urged the world’s richest countries to step up efforts to ensure private sector participation in sovereign debt relief efforts of low-income countries, many of which face record debt levels.

Malpass said the coronavirus pandemic had exacerbated the record debt burden many countries already faced before the outbreak, and said urgent action was needed to free up resources that low-income countries could devote health, education and nutrition, and climate action.

“History tells us that countries that have no way of escaping excessive debt burdens fail to grow and fail to sustainably reduce poverty,” he told the London School of Economics. in an online speech, highlighting the need for greater private sector participation. .

China, the world’s largest creditor, and other major Group of 20 economies last year offered the 70 poorest countries a debt service payment freeze, with some 43 countries participating in the to date and deferring $ 5.7 billion in payments.

Malpass said additional savings of up to $ 7.3 billion were expected by the end of June, but the relief effort fell short of expectations as major bilateral creditors outside the Paris Club participated only partially, and bondholders and other private creditors did not join at all. .

“G20 countries must educate and create incentives for all of their bilateral official creditors to participate in debt relief efforts, including national policy banks,” said Malpass. “They must also strongly encourage private creditors under their jurisdiction to participate fully in the sovereign debt relief efforts of low-income countries.”

The advanced G7 economies should also consider amending their laws to include immunity from seizure by commercial creditors who refuse to participate in debt treatments under the G20 common framework for debt restructuring agreed last year, did he declare.

Malpass reiterated his call for extending the G20 debt service suspension initiative until the end of the year, but said interest rate cuts and extended maturities could play a role. important in reducing the debt of countries. Transparency would be essential, he said.

“The private sector must also accept corporate responsibility – whether it is enforcing strong environmental and social standards, paying taxes or playing its part in debt resolution,” he said. declared. (Reporting by Andrea Shalal; editing by Jonathan Oatis)


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