Wednesday, 28 October 2020

Ghana pleads with G20 to extend ‘suspension on debt servicing’ for two years

Adnan Adams Mohammed

 

Ghana’s Finance Minister has been pleading with the rich countries to consider extending the moratorium on debt servicing for poorer countries as granted same by the World Bank.

 

Ken Ofori-Atta wants the G-20 countries to extend their Debt Service Suspension Initiative (DSSI) by two years and also re-examine the scheme. The World Bank, last week, announced the extension of the Debt Service Suspension Initiative (DSSI) for Ghana and other countries by six months.

 

 

At the behest of the COVID-19 pandemic and global rush for economy support, the G20 launched the Debt Service Suspension Initiative (DSSI), which freezes low-income countries’ external debt service payments to official bilateral creditors until the end of 2020 aimed at helping developing countries deal with the economic crisis caused by the COVID-19 pandemic. Ghana finance minister has stressed the importance of the G20 Debt Service Suspension Initiative in giving fiscal space to economies.

 

“Since its endorsement, many of the poorest countries have worked closely with official bilateral creditors. The moratorium has been a critical liquidity intervention to save much-needed resources to tackle the crisis before us.” Mr. Ofori-Atta made this call as he ended his tenure as chairman of the joint ministerial committee of the boards of governors of the World Bank and the International Monetary Fund.

 

“The crisis is threatening to reverse years of development gains and throw hundreds of millions of people back into poverty,” the Minister asserted.

 

The Minister explained that the COVID-19 pandemic has brought the world to a tipping point where critical action must be taken to avert imminent disaster.

 

“A lot has been said within the last eight months about what is upon us and what needs to be done to ensure a just and inclusive recovery for all; but a lot more needs to be done,” he added.

 

The pandemic has resulted in the largest global economic contraction of the last eight decades, overwhelming health systems, disrupted productivity, exacerbated job losses, reduced incomes, and threatens global food security particularly for the most vulnerable.

 

Also, by 2021 WBG and International Monetary Fund Spring Meetings, the World Bank will help determine if the economic and financial situation of developing and emerging economies requires to extend further the DSSI by another six months, with targeted complements to the April 2020 DSSI Term Sheet.

 

This will cushion many developing countries including Ghana from shocks brought by COVID-19 that has slowed down the fiscal consolidation process.

 

Mr Ofori-Atta, prior to this announcement to chair  the Development Committee of the Annual IMF/World Bank meeting, had pushed for an extension of the repayment of debts by African countries because of their economic state.

 

In a communique, the World Bank said all official bilateral creditors should implement this initiative fully and in a transparent manner.

 

“We strongly encourage private creditors to participate on comparable terms when requested by eligible countries. Thanks to the efforts of official bilateral creditors, the DSSI is creating much needed fiscal space and supporting the financing programs of the WBG and IMF for the poorest countries.”

 

It emphasized that “while protecting their current ratings and low cost of funding, we encourage MDBs to go further in their collective efforts in supporting the DSSI, including through providing net positive flows to DSSI-eligible countries during the suspension period, including the extension period.”

 

“We encourage the WBG to explore additional proposals for COVID-19 emergency financing for IDA countries in its discussions with IDA deputies. We ask the WBG and IMF to continue supporting DSSI implementation, including by providing further details on the  new resources they are providing to each eligible country. We ask the WBG and the IMF to continue their work to strengthen quality and consistency of debt data and improve debt disclosure”, it added.

 

Amid high public debt levels, shrinking economies, and rising fiscal pressures, the World Bank recognized that debt treatments beyond the DSSI may be required on a case-by-case basis.

 

In this context, it welcomed the G20’s agreement in principle on a “Common Framework for Debt Treatments beyond the DSSI”, which is also agreed by the Paris Club, adding, it look forward to the endorsement of the Common Framework by members, subject to their domestic approval procedures.

 

The Bretton Wood institution commended Mr Ofori-Atta, for his guidance and leadership as Chair of the Committee during the past two years, and Yvonne Tsikata for her invaluable service to the Development Committee over the past four years.

 

It welcomed Mia Amor Mottley, Prime Minister and Minister of Finance of Barbados, and Azucena Arbeleche, Minister of Economy and Finance of Uruguay, who have been selected as sequential Chairs for the periods of November 2020 to October 2021, and November 2021 to October 2022, respectively.

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