The French Finance Minister Bruno Le Maire has announced that the G20 has agreed a deal to suspend some of the debt payments of 77 of the poorest countries in the world.
Reacting to the news, Sarah-Jayne Clifton, Director of Jubilee Debt Campaign, said:
“This deal represents an important step forward. It will keep $12 billion in poor countries this year, giving them some important breathing space to help them fight the Covid-19 crisis. However, suspending payments rather than cancelling means countries will continue to pile up interest and face even bigger debt levels next year.
“We urgently need G20 governments to commit to engaging in a UN process to agree a comprehensive and enforceable way to cancel debts down to a sustainable level, ready to be implemented in 2021. Otherwise today’s debt suspension will be next year’s debt crisis.
“Calling for debt payments to private creditors to be suspended is not enough. The UK and New York must pass legislation to prevent any country from being sued for suspending debt payments during this crisis.”
Jubilee Debt Campaign understands that under the deal, to be signed-off by G20 Finance Ministers tomorrow:
- G20 governments are offering all the 77 countries a suspension of debt payments to them for the next year. This should save around $12 billion in the remainder of 2020 according to the French government, but all these debt principal and interest payments will still be due to be made in the future, and interest will accrue.
- G20 governments have called on multilateral institutions such as the World Bank to consider offering the same suspension, estimated to be $12 in the rest of 2020. The IMF has already announced that it is cancelling $215 million of debt payments for 25 countries over the next 6 months.
- The G20 have called on the private sector to also suspend debt payments, but it is not clear how this will happen. The French government estimate $8 billion is due to be paid to private creditors by the 77 poorest countries over the next year, which aligns with Jubilee Debt Campaign figures.
Virtually all international debt contracts are owed under UK or New York law. 90% of African government external bonds are owed under UK law. This means if any country stops making debt payments under these deals, they can be sued by the creditor in London. In 2010 the UK passed the Debt Relief (Developing Countries) Act which prevented countries from being sued by creditors who were not participating in a previous round of debt relief. This legislation needs to be updated to protect countries in this latest round of Covid-19 related debt crises.