Caribbean prods G20 on debt-service ease
Caribbean governments have sent a strong and clear message to the Group of Twenty (G20) developed countries to extend its Debt Service Suspension Initiative (DSSI) to highly indebted middle-income countries that are facing harsh economic setbacks amid the COVID-19 pandemic.
While commending a move by the G20 to extend the DSSI to the end of June, Prime Minister Andrew Holness said that there was a sound basis for it to be pushed back further to 2022.
“Consideration should also be given to expanding its beneficiaries to include highly indebted middle-income countries,” he added.
Participating in a virtual High-level Meeting on the International Debt Architecture and Liquidity on Monday, Holness said that private creditors represented an increasingly large share of the overall creditor composition of developing countries and should be actively engaged to participate in the DSSI on equal terms.
He is pushing for credit rating agencies to be part of the discussions, noting that many countries were reluctant to apply for debt relief because of the threat of a ratings downgrade.
The prime minister contended that extreme fiscal contractions were having a dramatic impact on the ability of developing countries to meet their sustainable development and climate action commitments.
He argued that for developing countries designated as middle income, and particularly for small island developing states, the pandemic has exposed developmental vulnerabilities that make the designation as middle income arbitrary and unhelpful in crafting a fair global response.
At the same time, Barbados Prime Minister Mia Mottley expressed gratitude for the suspension of debt service with the DSSI. She noted that, to date, 40 countries “had drawn just about US$5 billion last year, and that is welcome, but my friends, truly insufficient”.
Mottley also said that middle-income countries’ access to the international capital markets was thwarted, making them subject to downgrades.
The Barbadian prime minister asserted that developing states had been unable “to spend anywhere near as much as needed to avert massive unemployment and the new poverty”.
She said that new poverty more often than not was reflected in vulnerability, while new wealth manifested itself in resilience.
“So while developed countries have added 90 per cent of the over US$12 trillion of increased government debt last year, the economies of COVID-sensitive developing countries have contracted by as much as 20 per cent, five times the world average. These figures are startling,” she observed.
Meanwhile, Kristalina Georgieva, managing director of the International Monetary Fund (IMF), said that the Fund was now advanced in its consideration of a new special drawing rights (SDRs) allocation in the sum of US$650 billion to address the long-term global needs for reserve assets.
“I intend to present a formal proposal in June including measures to enhance transparency and accountability,” she said.
According to Georgieva, a new SDR allocation would support the global recovery, providing substantial direct liquidity boost to all IMF members without adding to their debt burden.
Action on debt is an integral part of this comprehensive response, said the IMF chief, noting that the DSSI provided valuable relief to eligible countries.
Georgieva said that the IMF strongly supported a further extension of the DSSI to the end of 2021. She said this was currently under consideration by G20 states.
The high-level meeting was held jointly by the Canadian and Jamaican prime ministers, along with secretary general of the United Nations, Antonio Guterres, and featured presentations from heads of multilateral agencies and vulnerable states.