G7 ministers urge full implementation of G20 debt freeze: US Treasury

Wednesday, 15 July 2020 00:00 - - {{hitsCtrl.values.hits}}

WASHINGTON (Reuters): Group of Seven finance ministers on Monday called for full implementation of a G20 freeze in debt service payments by all official bilateral creditors, amid growing pressure on China’s state-owned banks and enterprises to join the relief effort.

In a teleconference early Monday, the G7 ministers underscored the need for greater transparency about lending, a U.S. Treasury spokesperson said, an apparent reference to confidentiality clauses included in many Chinese loans to developing countries in Africa and elsewhere.

The ministers discussed domestic and international economic responses to the coronavirus pandemic and strategies to reverse a deeper-than-projected downturn in the global economy, ahead of a virtual meeting of finance officials from the Group of 20 advanced economies on Saturday.

G20 members, including China, and the Paris Club of official creditors in April offered a freeze on debt service payments to the 73 poorest countries through year-end to free up an estimated $12 billion in funds for fighting the outbreak. But implementation of the Debt Service Suspension Initiative (DSSI)has proven challenging, and the unexpectedly deep downturn in the global economy has prompted calls for extension and expansion of the moratorium.

China’s refusal to include its state-supported China Development Bank and state-owned enterprises in the debt payment suspension and concerns over confidentiality agreements included in many Chinese loans to countries in Africa have slowed progress in executing the debt freeze, economists say.

Private-sector participation has also been sluggish.

A senior U.S. official said the G7 ministers discussed the need for China to participate fully and transparently in the global initiative.

“It’s key, both to realising the full potential of the DSSI and from a transparency perspective,” the official said.

So far, 41 countries have applied for relief under the DSSI and the Paris Club has signed agreements with 20 countries ranging from Ivory Coast to Ethiopia and Pakistan.

World Bank President David Malpass said transparency was vital to ease work on debt restructurings and aid in reconciling debtor-creditor data.

“It’s important that the G20 broaden the scope of the debt suspension initiative, extend it, and that commercial creditors join,” he said in a statement to Reuters Monday.

Malpass last week backed an extension of the debt payment freeze through 2021 and the need for increased transparency about lending and said all official bilateral creditors, including policy banks such as China’s Development Bank, and state-owned enterprises with implicit government guarantees should take part.