FILE PHOTO: German Finance Minister Olaf Scholz awaits the start of the video conference of the G20 finance ministers and central bank governors in his ministry in Berlin, Germany, April 15, 2020. REUTERS/Hannibal Hanschke
DUBAI (Reuters) – Financial officials of the Group of 20 major economies said on Wednesday they had agreed on a coordinated approach for a suspension of debt service payments for the world’s poorest countries starting on May 1 until the end of the year.
The decision to suspend both principal repayments and interest payments affects all the International Development Association (IDA) countries that are currently on debt service to the International Monetary Fund and the World Bank, and all least developed countries as defined by the United Nations that are currently on any debt service to the IMF and the World Bank.
The move is part of efforts to provide stimulus to the global economy amid the new coronavirus outbreak, which is pushing the global economy into the steepest downturn since the Great Depression.
“We agreed on a coordinated approach with a common term sheet providing the key features for this debt service suspension initiative, which is also agreed by the Paris Club,” the G20 said in a joint statement.
They also called on private creditors to participate in the initiative “on comparable terms.”
The IMF director Kristalina Georgieva and World Bank David Malpass on Wednesday praised the new G20 debt relief agreement, which suspends bilateral debt service payments by poor countries.
Georgieva, in a statement to a meeting of G20 leaders also said the IMF was “urgently” seeking some $18 billion in new resources for the Fund’s Poverty Reduction and Growth Trust for poor countries and was exploring how the use of special drawing rights could aid this effort.
The debt suspension will last until the end of the year but creditors will consider a possible extension during 2020, the G20 said.
Reporting by Davide Barbuscia and Marwa Rashad; Editing by Toby Chopra