A G20 plan to ease the debt of poor countries during the pandemic is well below expectations, with low-income borrowers deferring less than a quarter of the repayments they owe, according to a report.
According to a study published on Wednesday by the Jubilee Debt Campaign, seen by the Financial Times, private creditors have deferred repayments worth only 0.2% of what was owed to them in the 14 months to June of this year. . More than half of the relief granted came from China.
The 46 countries that applied for the G20 initiative, known as DSSI, repaid $ 36.4 billion in debt between May 2020 and June 2021, with only $ 10.3 billion in repayments deferred and only $ 600 million canceled. 27 other low-income countries were eligible for the program, managed by the G20 in collaboration with the IMF, the World Bank and the Paris Club of official bilateral creditors. But they refused to participate.
At the same time, the debts of these countries continued to accumulate as they borrowed to deal with the pandemic. World Bank data released this week shows that the 73 DSSI-eligible countries borrowed an additional $ 90 billion in 2020, bringing their total debt to $ 860 billion by the end of the year.
David Malpas, President of the World Bank, said the build-up of debt was part of a “tragic reversal of development in many dimensions” caused by the pandemic. “What concerns me is that there is no process to manage the amount of debt,” he said.
Separate data from the United Nations Conference on Trade and Development (UNCTAD) shows developing countries globally incurred an additional $ 500 billion in debt last year, bringing the total to $ 11.3 billion .
“DSSI is just a tiny drop in the sea of developing country external debt,” said Stephanie Blankenburg, Debt and Development Finance Officer at Unctad. “Far too little is being done, too slowly, to tackle the structural factors that are causing the debt burden to rise in developing countries. “
The 46 countries participating in the DSSI have repaid $ 11 billion to bilateral lenders – foreign governments and their development agencies – and suspended payments totaling $ 10.3 billion, or 48% of the amount owed, according to the Jubilee’s analysis of World Bank data.
The IMF canceled repayments of $ 600 million, but debtor countries made further repayments on multilateral loans – from the IMF, the World Bank and other development banks – of $ 10.4 billion in the past. during the period.
The largest total payments went to private creditors – commercial banks, commodity traders and bondholders – who received $ 14.9 billion, with just $ 24 million suspended, or 0.2% of the amount. of.
“The fact that banks, hedge funds and oil traders are not participating in the flagship G20 debt suspension program has made fun of this initiative,” said Tim Jones, policy manager of the Jubilee Debt Campaign. “[The] has become a bailout program for private lenders.
The G20 initiative started in May last year and continues until the end of this year, having been extended twice. It will be replaced by a G20 “common framework” on debt treatment, under which countries facing debt distress will agree to agreements with bilateral creditors. They will then be forced to seek comparable terms from multilateral creditors and the private sector.
So far, only Chad, Ethiopia and Zambia have registered to participate.