World Bank president David Malpass. REUTERS/FLORENCE LO
World Bank president David Malpass. REUTERS/FLORENCE LO

Brussels/Berling/Washington — Financial leaders from the G20 major economies on Wednesday underscored the urgent need to bring the spread of the coronavirus pandemic under control, and agreed to extend a freeze in low-income countries' debt payments by six months.

In a lengthy communique, G20 finance ministers and central bank governors vowed to “do whatever it takes” to support the global economy and financial stability.

They also agreed in principle for the first time on a “Common Framework” to deal on a case-by-case basis with the rising number of low-income countries facing debt distress.

That marks a significant step forward for China, which has become a major creditor to poor countries in recent years, but had balked at the prospect of writing off any debts, according to sources familiar with the G20 deliberations.

The final draft of the communique, circulated on Wednesday during the annual meetings of the International Monetary Fund and World Bank, said the officials would finalise the new framework at an extraordinary meeting before G20 leaders meet in November. An earlier draft had the ministers adopting the framework, but officials were unable to reach agreement on that step this week.

The payment freeze extension was agreed due to continued liquidity pressure on low-income countries. G20 officials expressed disappointment about the absence of private-sector creditors in the moratorium.

World Bank president David Malpass told G20 officials it was critical to look beyond the G20's debt service suspension initiative, which only defers payments but does not reduce them.

He said the urgency of the crisis — which threatens to leave up to 150-million more people in extreme poverty by 2021 — required more forceful and quicker action on debt reduction for the most indebted of the world's poorest countries.

“The recession in advanced economies is less severe than had been feared, but in most developing economies, it has become a depression, especially for the poorest,” he said.

“It's urgent to make rapid progress on a framework because the risk of disorderly defaults is rising,” he said.

G20 leaders, recognising the uneven and highly uncertain outlook for the global economy, also pledged to continue to address the disproportionate impact the crisis has had on women, young people and other vulnerable segments of society.

IMF MD Kristalina Georgieva told a news conference that more international co-operation was needed to work on a vaccine, and early progress could boost global income by $9-trillion by 2025.

“Nine months into the pandemic, we are still struggling with the darkness of a crisis that has taken more than a million lives, and driven the economy into reverse, causing sharply higher unemployment, rising poverty, and the risk of 'a lost generation' in low-income countries,” she said.

“A durable economic recovery is only possible if we beat the pandemic everywhere,” she said.

The IMF projects a partial and uneven recovery in 2021, with global growth expected to reach 5.2%, but has warned that significant risks remain, including the resurgence of the virus.

Reuters

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