The economic slowdown due to the coronavirus is testing the resistance of the main world economies, but for the poorest countries it threatens to be a true catastrophe at all levels. Aware of this, the club of the most developed countries in the world, the G7, has given its approval to the approval of a temporary suspension of the payment of the debt service of the most vulnerable and poor nations, a decision in which the G20 has the last word but which is almost already taken as a risk.
In their last virtual meeting, on Tuesday, the economy ministers and the central bank governors of the G7 countries (Germany, Canada, France, the United States, Italy, Japan and the United Kingdom) agreed to “support multilateral efforts to assist to the most vulnerable and poorest countries “and declared” willing to provide a limited suspension of debt service payments “of these nations as long as they give their approval” all the official bilateral creditors of the G20 and as agreed with the Paris Club ”, according to a joint statement issued by the United States Treasury Department, the current G7 president. These are conditions that, according to France, already exist, since even China, announced the French Minister of Economy, Bruno Le Maire, has shown himself willing to lean his shoulder on this cause.
According to Le Maire in a conference call with journalists prior to the virtual meeting with his G7 colleagues, France has pushed the agreement to convince its partners to accept a “moratorium on a bilateral and private level for 76 countries,” including some forty nations. sub-Saharan.
Although in its joint statement the G7 does not mention figures, according to Paris there is already a moratorium agreement for 20,000 million dollars of the total of 32,000 million that add up to the payments that these countries should pay. These are 12,000 million from bilateral creditors and 8,000 million from private creditors. What remains to be defined, always in agreement with Le Maire, is what will happen to the 12,000 million dollars of debt contracted with the multilateral institutions and that “are still under discussion”. In the case of France, the moratorium will affect one billion euros of debt repayment.
It is about going beyond aid and loans approved by international institutions such as the IMF or the World Bank and supporting these countries so that they “can resist the violence of the economic shock” to which the coronavirus epidemic exposes them, explained Le Maire . A support that will also result, after all, in the creditor countries themselves because, recalled the French, we are not only talking about a “risk of humanitarian and economic catastrophe” in these countries, but also about the “question of migratory flows that could arise quickly ”as a result of this new health and economic crisis.
The International Monetary Fund (IMF) and World Bank (WB) have already called on official creditors to provide relief to the world’s 76 poorest countries, and the IMF on Monday approved a six-month suspension of debt payments. of 25 nations, most of Africa.
A day after the French president, Emmanuel Macron, called in a solemn speech to the nation to “help our neighbors in Africa” to overcome the coronavirus crisis, even “massively canceling their debts”, Le Maire clarified that this issue could Consider only at the end of the year, depending on how the world situation is at the time, and exclusively for countries that are unable to pay their debts even with all the aid received.
“In a second moment, between now and the end of the year, it will be necessary to analyze the debt sustainability of all those states that have benefited from the moratorium and the support of the IMF and the World Bank to see if their debt is sustainable or not. It will depend on essential parameters that we do not yet know: the world trade situation and the price of raw materials. If some poorer countries cannot sustain the debt, it could lead to a debt cancellation that will be done on a case-by-case basis and necessarily within a specific framework, ”explained Le Maire.
In its statement, the G7 does not go that far and simply points out that this temporary debt moratorium initiative “would provide liquidity support to help those countries deal with the health and economic impact of the crisis.”
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