The Group of Twenty (G20) Finance Ministers and Central Bank Governors has reaffirmed its commitment to support efforts by low- and middle-income countries to address debt vulnerabilities in an effective, comprehensive and systematic manner.
“We recognise that a high level of debt is one of the obstacles to inclusive growth in many developing economies, which limits their ability to invest in infrastructure, disaster resilience, healthcare, education and other development needs,” read the Ministerial Declaration on Debt Sustainability on Thursday.
The declaration was released at the conclusion of the fourth G20 Finance Ministers and Central Bank Governors meeting, which took place in Washington, DC in the United States of America. The meeting took place on the sidelines of the Annual Meetings of the International Monetary Fund (IMF) and World Bank.
It further outlined actions to enhance debt sustainability.
While the risk of a systemic debt crisis appears to be broadly contained, many vulnerable low and middle- income countries face high financing costs, large external refinancing needs, and a significant outflow of private capital.
According to the Finance Ministers and Central Bank Governors, interest payments on total external public debt have increased significantly and have more than doubled over the past decade for low-income countries (LICs).
“We reiterate our commitment to further strengthen the implementation of the Common Framework for Debt Treatments beyond the Debt Service Suspension Initiative (DSSI) in a predictable, timely, orderly, and coordinated manner,” the declaration said.
Launched in 2020, the DSSI temporarily suspended debt payments for eligible low-income countries to help them cope with the economic impact of the COVID-19 pandemic.
“We reaffirm our call to enhance debt transparency from all stakeholders, including private creditors. We support the ongoing review of the International Monetary Fund-World Bank Low Income Countries Debt Sustainability Framework (LIC-DSF), which will result in further improving the methodology underpinning the IMF-World Bank Debt Sustainability Analysis (DSA) for LICs and thus contribute to understanding and addressing debt vulnerabilities more effectively,” the declaration stated.
The Finance Ministers and Central Bank Governors noted that the voluntary use of crisis resilient debt clauses where appropriate could potentially provide vital breathing space and liquidity.
“We note the efforts to explore the consideration of the use of liability management operations and debt-for-development, debt-for-climate, or similar swaps on a voluntary and case-by-case basis, with a balanced view on their benefits and limitations to help strengthen debt sustainability.”
The Finance Ministers and Central Bank Governors indicated that they remain committed to engaging constructively with key stakeholders in further advancing common understanding, including with the private sector, official bilateral and multilateral creditors and debtor countries, for example, in the context of the Global Sovereign Debt Roundtable (GSDR).
“It is important to engage with and enhance the voice of borrower countries. We continue to urge the international community to support vulnerable countries with a strong reform agenda whose debt is sustainable but are facing liquidity challenges and encourage the IMF and the World Bank to continue their work on feasible options to support these countries, which should be country-specific and voluntary.
“We underscore the importance of addressing gaps in debt management, debt transparency, public financial management, and domestic resource mobilisation and will continue to advance adequate capacity-building initiatives to this end,” the declaration said. -SAnews.gov.za
