G20 finance ministers agree debt framework for countries in need of deep Covid-19 relief | world news

G20 finance ministers have agreed for the first time on a new common framework for public debt restructuring, in anticipation that the coronavirus crisis will leave some poor countries in need of deep relief.

The Covid-19 pandemic is straining the finances of some developing countries and G20 ministers said on Friday they recognize more should be done to help them than a current temporary debt freeze, which will be extended until June 30, 2021.

Major creditors, including China, will have to follow common guidelines on how debt deemed unsustainable can be reduced or rescheduled.

The new framework outlined on Friday borrows heavily from the rules of the Paris Club, an informal grouping of mainly rich-country governments that was until now the only common forum for negotiating debt restructurings.

Under the new framework, creditor countries will negotiate with a debtor country, which will have to seek the same terms of treatment from private sector creditors.

G20 finance ministers said in a joint statement that the framework aims to “facilitate the rapid and orderly treatment of debt” for countries eligible for a debt payment freeze put in place in April, but which does not only included private sector creditors on a voluntary basis.

“The fact that we, including non-Paris Club members, agreed on such an issue was historic,” said Japanese Finance Minister Taro Aso, adding that private sector creditors should also stick to the new framework.

“From now on, all interested parties must ensure that the common framework is implemented. Debt transparency is extremely important,” Aso told reporters after a G20 conference call.

The new framework also goes further than a debt freeze by requiring the participation of all official creditors, after China was criticized by G20 partners for not including debt owed to its state-owned banks.

China has become one of the biggest creditors to developing countries in recent years, often lending through institutions like the China Development Bank and China EXIM.

But China is wary of debt cancellations and Beijing has defined the state-owned China Development Bank as a private institution, resisting calls for full participation in debt relief.

The Paris Club, which is organized by France’s finance ministry, and G20 countries already agreed last month to extend this year’s debt freeze under which they deferred $5 billion in debt servicing. debt to help the world’s poorest countries deal with the coronavirus crisis.

G20 leaders are expected to endorse the common framework at a virtual summit meeting next week.

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