G20 nations to freeze debt of world's poorest; IMF, World Bank welcome move

Finance officials from the Group of 20 major economies agreed on Wednesday to suspend debt service payments for the world's poorest countries through the end of the year, a move quickly matched by a group of hundreds of private creditors.

The actions to freeze both principal repayments and interest payments will free up more than $20 billion for the countries to spend on improving their health systems and fighting the coronavirus pandemic, Saudi Finance Minister Mohammed al-Jadaan told reporters after a virtual meeting of G20 finance officials.

Saudi Arabia is hosting the G20 meetings this year. Wednesday's video conference meeting of finance ministers and central bank governors ran well over the scheduled two hours, delaying news conferences planned by al-Jadaan and International Monetary Fund Managing Director Kristalina Georgieva.

The meeting came amid widespread criticism - including from many G20 member countries - of US President Donald Trump's decision on Tuesday to temporarily halt funding to the World Health Organization over its handling of the Covid-19 pandemic, which has now killed 131,000 people.

The debt standstill offer is open to the world's poorest and least-developed countries, as defined by the World Bank and the United Nations, as long as they are current in their debt service payments to the World Bank and the IMF.

German Finance Minister Olaf Scholz called the move "an act of international solidarity with a historical dimension," adding it would let the countries invest in healthcare "immediately and without time-consuming case-by-case examination".

Oxfam International said more work was needed to protect Lebanon, Ecuador and other countries not covered by the deal, and to raise the estimated $1 trillion needed to help countries weather the "economic tsunami" unleashed by the pandemic. The charity group and others have called for cancellation - not just suspension - of poor countries' debts in 2020.

A source familiar with the agreement told a news agency it would cover $12 billion to $14 billion in bilateral debt service payments owed by the 76 International Development Association (IDA) countries, plus Angola, through the end of the year.

Georgieva welcomed the G20's "exceptionally rapid" decision to move ahead on debt relief. In a new IMF document, she said debt relief was in the interest of all, "as the global community is as strong as its weakest member in a global pandemic."

Private creditors also engaged

Private creditors will join the debt relief effort on a voluntary basis, said the International Institute of Finance, which represents 450 banks, hedge funds and other global financial firms.

A French finance ministry official on Tuesday said private creditors had agreed to roll over or refinance $8 billion of the debt of the poorest countries, on top of the roughly $12 billion in debt payments to be suspended by bilateral creditors.

A further $12 billion is owed to multilateral lenders, mainly the World Bank, French Finance Minister Bruno Le Maire told reporters, although he provided no details.

World Bank Group President David Malpass said the Bank, the IMF and other multilateral lenders were exploring options for suspending their debt service payments while maintaining high crediting ratings on their bonds.

"This is a powerful, fast-acting initiative that will do much to safeguard the lives and livelihoods of millions of the most vulnerable people," he and Georgieva said in a joint statement.

The debt suspension will last until the end of the year but creditors will consider a possible extension during 2020, taking into account a report on countries' liquidity needs by the World Bank and the IMF, the G20 said.

Georgieva, in a statement to the 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 the use of special drawing rights to bolster its $1 trillion in lending capacity.

IMF, World Bank welcome G20's move to provide debt relief

IMF) and the World Bank Group have welcomed the Group of 20 (G20)'s decision to provide temporary debt relief for the world's poorest countries amid the COVID-19 pandemic.

"We strongly welcome the decision of the G20 to respond to our call to allow the poorest countries of the world that request forbearance to suspend repayment of official bilateral credit on May 1," World Bank Group President David Malpass and IMF Managing Director Kristalina Georgieva said in a joint statement.

US stalling massive IMF liquidity boost over Iran, China

US opposition to opening new avenues of funding for Iran and China is preventing the International Monetary Fund from deploying a powerful tool to help countries fight the economic impact of the coronavirus, according to two sources familiar with the matter.

A massive IMF liquidity injection through the issuance of new Special Drawing Rights, something akin to a central bank "printing" new money, has the backing of many finance ministers, prominent economists, and non-profit groups.

It could provide hundreds of billions of dollars in urgently needed foreign exchange reserves for all of the IMF's 189 member countries, and finance officials are debating the issue during this week's virtual IMF and World Bank Spring Meetings. But Reuters sources said the United States, the IMF's dominant shareholder, actively opposed the new fundraising.