G20 Debt Relief Program For Low Income Countries Underperforms As Payments Remain Higher Than Suspensions

An initiative by the world’s wealthiest nations to suspend debt payments by low-income countries to help them respond to the COVID-19 pandemic is falling below expectations.

Last year, nations of the G20 forum of the world's 20 largest economies launched the Debt Service Suspension Initiative (DSSI) that offered a temporary pause on debt payments by low-income nations. The purpose was to help free up these countries' resources to invest in their public health systems to combat the COVID-19 pandemic as it spread worldwide. However, despite some respite, debt-holding nations among the G20 were still collecting more in payments than they suspended.

In a recent analysis by Jubilee Debt Campaign, a U.K.-based advocacy group, it was found that low-income nations spent $36.4 billion on external debt payments during the pandemic with only $10.9 billion suspended or canceled between May 2020 and June 2021.

Jubilee’s analysis included data on 46 countries that applied for the DSSI program last year. Of the G20 nations that continued to take in debt payments, China took in more than half of the $11 billion paid during this period. It was followed by France, Japan and Saudi Arabia.

Bilateral institutions suspended the bulk of payments at $10.3 billion while multilateral institutions, including the International Monetary Fund (IMF), only canceled $0.6 billion in payments versus the $10.4 billion received by debtor nations.

The bulk of the payments went to private lenders that were not obliged to take part in the G20 initiative. Payments to private lenders amounted to $14.9 billion compared to only 0.2% that was canceled. Of the $20 billion in payments private lenders pledged to cancel, a paltry $24 million was suspended.

DSSI was originally set to end in December 2020, but it was extended to December 2021 as the COVD-19 pandemic persisted. The G20 is working to replace the DSSI with the Common Framework for Debt Treatments to help with debt restructuring and a reduction in debt value to "restore sustainability." Both the IMF and World Bank warn that developing countries are still in need of relief as the pandemic continues, warning that more comprehensive debt relief is needed.