The Group of 20 nations announced Wednesday a temporary halt to debt payments for the world’s poorest countries in a virtual meeting chaired by Saudi Arabia.
“We support a time-bound suspension of debt service payments for the poorest countries that request forbearance,” the G20 said in a statement.
The debt suspension is set to last one year, with the only requirement being that countries engage with the IMF, Saudi Arabian Finance Minister Mohammed al-Jadaan said.
The meeting of global finance ministers and central bank governors comes a day after the Group of Seven (G7) nations met to express support for the world’s poorest economies amid the coronavirus pandemic, officially known as COVID-19. Support was raised for a temporary halt to all debt payments, but it was contingent on G20 agreement.
The G20 voiced supported for the International Monetary Fund’s crisis response package and news that the fund stands ready to mobilize its $1 trillion lending capacity. The group also called for implementation of emergency response packages from the World Bank and other regional development banks.
“This amounts to more than $200 billion for emerging and low-income countries. We encourage Multilateral Development Banks (MDBs) to work closely together and with development partners at the country level to ensure consistency, optimize the use of resources, ensure debt remains sustainable and maximize the development impact,” the statement read.
The agreement by the G20 to pause debt will come as welcome relief to poorer countries that lack the financial resources to combat the economic fallout of the coronavirus pandemic.
“We strongly welcome the decision of the G20 to respond to our call to allow the poorest countries of the world that request forbearance to suspend repayment of official bilateral credit on May 1,” a joint statement by World Bank Group President David Malpass and IMF Managing Director Kristalina Georgieva said.
“This is a powerful, fast-acting initiative that will do much to safeguard the lives and livelihoods of millions of the most vulnerable people.”
The IMF warned Tuesday that global economy is set to see its biggest recession in nearly a century due to the impact of lockdown measures that have been put in place to combat the spread of coronavirus.
“It is very likely that this year the global economy will experience its worst recession since the Great Depression, surpassing that seen during the global financial crisis a decade ago. The Great Lockdown, as one might call it, is projected to shrink global growth dramatically,” IMF Chief Economist Gita Gopinath said.