© Reuters. FILE PHOTO – A woman counting Ethiopian birr bills after she sold a cabbage on the Mercato Market in Addis Ababa, November 14, 2015. REUTERS/Tiksa Negeri
LONDON, (Reuters) – A G20 initiative aimed to reduce financial strains in the poorest nations of the planet has resulted in less than 25% of debt payments being suspended – far below what was expected of the program’s results, a charity for debt management said Tuesday.
A group of countries with major economies established the Debt Service Suspension Initiative in spring 2020. It was intended to temporarily freeze payments to low-income nations. Many had previously faced heavy debts in advance of the global coronavirus epidemic.
“Figures, calculated using IMF sources and World Bank sources show that 46 low-income countries who applied for this scheme still paid $36.4 billion in interest payments,” Tim Jones of Jubilee Debt Campaign said in a statement. He is a UK charity working towards eliminating poverty.
This is compared with $10.3 billion in debt payments that were frozen and only $600 million that had been cancelled.
The charity estimated that $10.3 billion was suspended by governments in China, France, and Saudi Arabia, but $11 billion had been paid. The initiative did not include private creditors who were not forced to participate. They suspended 0.2% payments, but received close to $15 billion in total during the pandemic.
Monday’s warning by the World Bank was a reminder that the global pandemic will result in a 12 percent increase in debt burdens of low-income countries, reaching a record $860 Billion in 2020. It called for immediate efforts to decrease debt.
This money, which was backed by G20, World Bank and Paris Club sovereign lenders, was to be used for health system and pandemic spending.
In 2020, shortly after the launch of the initiative last year by the World Bank, it estimated that $12 billion could be saved in aid for poor countries.
Jones stated that the G20’s debt suspension program has been blasted for not requiring banks, oil traders and hedge funds to participate. Jones stated that “tens of billions have flowed out of low-income countries when they were urgently needed to safeguard lives and livelihoods.”
Even though the DSSI programme expires at the close of the year and the G20 launched a Common Framework for Debt Treatments to help reduce debt burdens in poor countries, rather than freezing payments, However, progress has been slow with only three countries – Chad, Ethiopia and Zambia – having signed up for it and none having completed the process.
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