G20 Summit: Finance Minister highlighted the Debt Service Suspension InitiativeWhile attending a virtual meeting of finance ministers of the G20 nations to discuss the global economic outlook amid the COVID-19 crisis, finance minister Nirmala Sitharaman on Friday, November 20, stressed theneed for continued and collectiveefforts by G20 members to tackle the damaging impact of the pandemic.
Sitharamanalso highlighted the Debt Service Suspension Initiative (DSSI) as an important step by the group and stated that it is a crucial outcomeunder the Saudi Arabian Presidency, delivered by all G20 members.
(Also Read:PM Modi To Attend 15th G20 Summit On November 21-22)Initially, the DSSI wasin force until the end of 2020.
However, due to the continued liquidity pressures, the G20 had agreed to extend the DSSI by six moremonths.
The G20 will examine in 2021 again to see if the economic and financial situation requires a further extension of the DSSI.The Debt Service Suspension Initiative, approved in April,offers a temporary suspension of the official sector or government-to-government debt payments.
The proposed extension has been madetill June next year.The payments covered under the initiative are not forgiven but delayed, with a repayment period of three years and a one-year grace period.
According to the estimates of the World Bank,43 of a potential 73 eligible DSSI countries have deferred just over $5 billion of debt to date.To receive the DSSI relief, the eligible countries have toapply for an arrangement with the International Monetary Fund (IMF).
This could either be a regular program or a shorter-term emergency facility.The eligible countries need tocommit to utilizingthefreed-up resources to increase health, social, or economic spending in response to the ongoing crisis.
The beneficiaries also commit to disclose all public sector debt and debt-like instruments.The eligible countries would include all of the International Development Association (IDA) countries and theleast developed countries, as defined by the United Nations (UN), which are currently on debt service to the World Bank and IMF.This includes72 active IDA borrowing countries along withAngola.According to estimates, the official bilateral debt service payments in these countries would have totaled around$14 billion this year, including the interest and amortization payments.Estimates also suggest that extending the temporary freeze by six months will provide a further $6.4 billion of relief for the 43 countries that have already signed up for the initiative.Till now, no country has publicly applied for similar treatment from any private-sector creditors.