The world’s largest economies extended a program that allows the poorest countries to suspend their debt payments so they can focus their fiscal resources on the coronavirus pandemic.
The debt-suspension program, created by the Group of 20 nations in April, will remain in place for another six months past its original December expiration date, the group decided Wednesday. The G-20 comprises the biggest advanced and emerging-market economies, including the U.S., China and the European Union.
The decision was made during the annual meetings, being conducted virtually, of the International Monetary Fund and World Bank. The IMF and World Bank started the initiative to suspend debt payments in the spring, and it eventually was adopted by the G-20.
A total of 73 of the world’s low-income countries are eligible to suspend payments on debt that is owed to government entities. Of those, 44, primarily in sub-Saharan Africa, were participating as of Oct. 6, according to World Bank data.
“During our April 2021 meetings we will look into the need for extending it even more,” said Mohammed Al-Jadaan, the finance minister of Saudi Arabia, which holds the presidency of the G-20 this year.
“We remain committed to continue working together to support the poorest countries as they address health, social and economic challenges associated with the Covid-19 pandemic,” the G-20 said.
The savings on the program have been somewhat smaller than hoped. Had all eligible countries participated, they would have saved around $12 billion through the end of 2020, according to World Bank estimates. But with many countries opting not to suspend payments, potential savings for participating countries come to around $9 billion.
Still, the suspension is meaningful for some of the world’s poorer countries. Mozambique, for example, stands to save 2% of its gross domestic product by suspending payments this year, while for Angola the figure is over 3%, according to World Bank estimates.
Only official bilateral debt, meaning debt held directly by other governments, is eligible for the program. Most debt from the world’s poor countries, however, is held by private investors.
The G-20 has urged private-sector creditors to participate, but there has been little interest. Countries have been largely unwilling to ask for debt suspension from private creditors because such a move would potentially damage their credit ratings.
“We are disappointed by the absence of progress of private creditors’ participation,” the G-20 said.
The G-20 meeting was met with disappointment by civil-society groups that had been advocating stronger action to relieve debt burdens in the world’s poorest countries.
“With the economic chaos caused by Covid-19 threatening to set the fight against poverty back decades, extending the Debt Service Suspension Initiative was the bare minimum the G-20 could do,” said Jaime Atienza, the debt policy lead for Oxfam International, the London-based antipoverty organization.
The ONE Campaign, backed by the musician Bono, also criticized the G-20.
“It didn’t go far enough,” said David McNair, executive director for global policy at ONE. “Private creditors have done little to support the world’s poorest countries. G-20 countries need to get them on board to support the debt service standstill, but time is running out.”
Write to Josh Zumbrun at Josh.Zumbrun@wsj.com
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