G20 initiative leads to less than a quarter of debt payments being suspended

14 October by Jubilee Debt Campaign


Lower income countries which applied for scheme have spent $36.4 billion on external debt payments during the pandemic, and had just $10.9 billion suspended or cancelled. Private creditors received the largest amount of debt payments, $14.9 billion, and suspended just 0.2% of payments

New figures released today by Jubilee Debt Campaign show that the flagship G20 G20 The Group of Twenty (G20 or G-20) is a group made up of nineteen countries and the European Union whose ministers, central-bank directors and heads of state meet regularly. It was created in 1999 after the series of financial crises in the 1990s. Its aim is to encourage international consultation on the principle of broadening dialogue in keeping with the growing economic importance of a certain number of countries. Its members are Argentina, Australia, Brazil, Canada, China, France, Germany, Italy, India, Indonesia, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, USA, UK and the European Union (represented by the presidents of the Council and of the European Central Bank). debt initiative has suspended just 23% of lower income countries debt payments. The figures, calculated from IMF IMF
International Monetary Fund
Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.

http://imf.org
and World Bank World Bank
WB
The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

sources, reveal that 46 lower income countries that applied for the scheme still paid out $36.4 billion in debt payments. This is compared to $10.3bn of debt payments that were suspended and $0.6bn cancelled*. The figures are released ahead of the G20 Finance Ministers on 15-16 October which will discuss the G20s debt suspension and restructuring schemes.

On launching the debt suspension initiative in April 2020, the G20 promised it would lead to more than $20 billion of debt payments being suspended to free up resources to spend on health systems and fighting the pandemic in 2020 alone.

Private creditors suspended just 0.2% of debt payments and were paid $14.9 billion during the pandemic, as they were not compelled to take part in debt suspension. Multilateral institutions received $10.4 billion in debt repayments, although the IMF did cancel* $0.6 billion. Governments including China, France and Saudi Arabia suspended $10.3 billion, but were still paid $11 billion.

The $10.3 billion of debt payments that have been suspended are all due for payment in the mid-2020s, on top of the payments due then, which will push up debt payments and act as a break on any economic recovery from the pandemic.

Tim Jones, Head of Policy at Jubilee Debt Campaign, said:

The figures reveal that China suspended the most debt, with $5.7 billion of payments halted and pushed into the future, over half the global total. In contrast, UK based commercial lenders suspended no payments at all, and receiving at least $3.2 billion in debt payments from countries applying for the debt suspension initiative.

Some of the most indebted and climate-vulnerable countries in the world received almost no benefit – the Caribbean islands of Dominica and Grenada had 1% or less of their payments suspended, as they owe their debt to private and multilateral lenders. Sixteen of the 46 countries had 10% or less of payments suspended, and over half 20% or less.

In April 2021, the G20 extended the scheme to run until the end of 2021. On a pro rata basis, this means the original aim of $20 billion of debt payments being suspended should have expanded to $35 billion by June 2021, and $50 billion by end-2021.

The G20 is replacing the suspension initiative with a Common Framework for Debt Treatments, a scheme which allows for debt cancellation, not just suspension. In agreeing the Common Framework, the G20 said debtors applying for it would need to get private creditors to take part in any debt reduction on the same terms as bilateral creditors. However, they offered no new tools, such as legislation in the UK and New York, to help compel private creditors to take part in necessary debt reductions. Three countries have so far applied for the Common Framework – Chad, Ethiopia and Zambia – but none have yet had any debt reduced, and private creditors have failed to agree debt reduction terms.

Further detail

For the full figures and methodology of how they were calculated, see Jubilee Debt Campaign’s briefing ‘How the G20 debt suspension initiative benefits private lenders

All figures were calculated from the IMF and World Bank’s Joint IMF-WBG Staff Note: DSSI Fiscal Monitoring Update and Country Annex https://www.imf.org/en/Publications/Policy-Papers/Issues/2021/09/16/Joint-IMF-WG-Staff-Note-DSSI-Fiscal-Monitoring-Update-465864 and World Bank DSSI database https://datatopics.worldbank.org/debt/ids/

The G20 Debt Service Debt service The sum of the interests and the amortization of the capital borrowed. Suspension Initiative was launched in April 2020 and began operating from the start of May 2020. The figures are for the 46 countries which applied for the scheme, from May 2020 to June 2021.


Debt payments and suspension by creditor group for the 46 countries applying

Creditor groupingPayments suspendedPayments made% of payments suspended
Bilateral $10.3 billion $11 billion 48%
Multilateral $0.6 billion
[Cancelled
$10.4 billion 5%
Private $0.024 billion $14.9 billion 0.2%
Total $10.9 billion $36.4 billion 23%


Debt payments and suspension by selected creditors for the 46 countries applying

CreditorPayments suspendedPayments made% of payments suspended
UK-based private lenders,
not including bonds
$0 billion $3.2 billion 0%
Bondholders $0 billion $5.3 billion 0%
World Bank $0 billion $3.2 billion 0%
IMF $0.6 billion [Cancelled $1.9 billion 24%
China $5.7 billion $6.9 billion 45%
Japan $0.5 billion $0.4 billion 56%
India $0.3 billion $0.2 billion 60%
France $0.9 billion $0.5 billion 64%
Saudi Arabia $0.5 billion $0.2 billion 71%


Debt payments suspended by debtor

Country Percentage of debt
payments suspended
1 Dominica 0%
2 Cote d’Ivoire 1%
3 Grenada 1%
4 Papua New Guinea 2%
5 Fiji 3%
6 St Lucia 3%
7 Tanzania 3%
8 Lesotho 5%
9 Maldives 6%
10 Ethiopia 8%
11 Pakistan 9%
12 Afghanistan 10%
13 Chad 10%
14 Kenya 10%
15 Mozambique 10%
16 Yemen 10%
17 Senegal 11%
18 Madagascar 16%
19 Nepal 16%
20 Guinea-Bissau 17%
21 Gambia 18%
22 Myanmar 19%
23 Congo, DR 20%
24 Mali 20%
25 Tajikistan 21%
26 Djibouti 25%
27 Malawi 25%
28 Uganda 27%
29 Zambia 27%
30 Cabo Verde 28%
31 Cameroon 30%
32 Niger 36%
33 Tonga 39%
34 Burundi 42%
35 Sao Tome and Principe 44%
36 Burkina Faso 49%
37 Samoa 50%
38 Togo 50%
39 Angola 52%
40 Guinea 52%
41 Sierra Leone 57%
42 Comoros 59%
43 Congo, Rep 65%
44 Central African Republic 74%
45 Mauritania 74%
46 Liberia 78%

*
For the CADTM, the IMF has not cancelled any of its claims. In reality, via the JTRC, several countries of the North have paid the debts owed to the IMF in place of the countries of the South concerned. In another form, the IMF has collected its debts.




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