WASHINGTON- World Bank President David Malpass said he expects China, the United States and other Group of 20 major economies to extend a freeze in bilateral debt service payments through the end of 2021 when they meet this week.
The G20 Debt Service Suspension Initiative (DSSI) has already helped countries defer some $5.7 billion in payments through the end of 2020, with another $7.3 billion in deferred payments expected through June, according to World Bank data.
Extending the debt payment freeze through year-end would save even more money that countries could use to combat the COVID- 19 pandemic and support their economies, Malpass told reporters, but gave no specific estimate.
He said G20 members would probably stipulate that such an extension would be the “last or final” one offered.
Doing so would incentivize countries to move toward more “permanent solutions to their debt situations,” including through the G20 Common Framework for debt treatments, the World Bank and International Monetary Fund said in a joint paper prepared for their spring meetings this week.
While the temporary freeze in debt payments would help, Malpass said “actual debt relief ” would be needed in the longer term to allow the poorest countries to reduce their unsustainable debt burdens to a more moderate level.
The IMF-World Bank paper said low-income countries were still building their understanding of and confidence in the Common Framework, which could limit its initial utilization.
It said extending the DSSI debt freeze would give time for the framework process to become fully operational, but it might also delay “difficult-but-necessary restructuring decisions” for some countries.
So far, it said, only three countries – Zambia, Ethiopia and Chad – had requested a debt treatment under the common framework agreed by G20 members and the Paris Club of official bilateral creditors, but 35 countries were now assessed to be “at high risk of debt distress or in debt distress.”