G20 has driven momentum on a standstill of debt repayments for the poorest countries. Necessary in this time of crisis. A thread of a few important points from yesterday's statement g20.org/en/media/Docum… 1/n
G20 pledged for “time-bound suspension of debt service payments for the poorest countries that request forbearance”. What’s 100% included? Both principal repayments & interest payments. So far official bilateral debt (ie country to country lending). 2/n
Key development yesterday is “all bilateral official creditors will participate” so crucially China looks to be onboard (had typically done bespoke non-coord debt relief before). Grown over past decade to be large creditor to lower-income countries 3/n
At this point multilateral development banks still outside initiative, but asked to: “further explore the options for the suspension of debt service payments over the suspension period, while maintaining their current rating and low cost of funding” 4/n
They then called on private creditors, to work with industry org the Institute of International Finance @IIF "to participate in the initiative on comparable terms” 5/n
Unclear exactly what private debts might go on stand-still. Complex space. Different types: eurobonds, oil-backed loans, commercial bank loans, foreign investors purchases of local currency domestic debt. Important source of potential relief for many frontier economies 6/n
G20 suggested suspension period could start May 1st. The list of countries was extended from “all IDA-countries” to include “all least developed countries as defined by UN”, so adds Angola to the list of eligible. 7/n
Summary: G20 have made important step following requests led by African political leaders in past weeks. Financing for poorest countries is crucial in this crisis, as is some debt relief. No longer about whether but about how. Lots of work to do still on how, as debt is complex.
More thoughts in this article: bondvigilantes.com/blog/2020/04/0…
