- Warning of future debt crises if debt not cancelled outright
- Legislation needs to be passed to ensure private sector complies with voluntary debt payment suspension
G20 Finance Ministers have announced they have reached agreement on a suspension of debt payments in response to the Covid-19 crisis. The suspension covers debt payments by 77 countries to G20 and other governments from 1 May to the end of 2020, estimated to be $12 billion. The payments will not be cancelled but come due to be paid between 2022 and 2024, along with interest accrued in the meantime. There will be a review before the end of 2020 as to whether further action will be taken.
The G20 announcement also calls on private creditors to similarly suspend debt payments, and calls on multilateral creditors to explore options for doing so.
Sarah-Jayne Clifton, Director of Jubilee Debt Campaign said:
“This is a first step in dealing with the magnitude of the coronavirus debt crisis, but much more needs to be done. The G20 deal keeps vital money in countries for now, but today’s suspension will soon become tomorrow’s debt crisis unless payments are cancelled in full. We urgently need a UN-led process to cancel external debt owed to all creditors, for all countries in crisis.”
“The suspension of debt payments to private creditors is only voluntary. The UK and New York can make sure it happens by introducing emergency legislation to prevent any lender suing a country for stopping debt payments during the current crisis. Otherwise, the real beneficiaries of today’s deal could be rich speculators who keep being paid thanks to debt suspensions by other lenders.”
For the 77 countries covered in this deal, other governments make-up 45% of external debt principal and interest payments due in 2020, multilateral lenders 29% and private lenders 26%. Jubilee Debt Campaign has calculated that 64 countries currently spend more on debt payments than healthcare..
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.
The 77 potentially eligible countries are in the table below.
|South and East Asia
|Europe, Central Asia and the Middle East
|Latin America and the Caribbean
|Central African Republic
|Papua New Guinea
|Sao Tome and Principe