New Delhi: The G20 Finance Ministers and Central Bank Governors (FMCBG) meeting under the Saudi Arabian Presidency today, decided to extend the Debt Service Suspension Initiative (DSSI) by 6 months in light of the continued liquidity pressures. It further decided to examine if the economic and financial situation required a further extension of the DSSI, by the time of the 2021 International Monetary Fund and World Bank Group Spring Meetings .
The Debt Service Suspension Initiative (DSSI) which provides time bound suspension of debt service payments for the low income debtor countries that request forbearance, is one of the key outcomes of the G20 Action Plan. (In April, the World Bank’s Development Committee and the G20 Finance Ministers had endorsed the Debt Service Suspension Initiative (DSSI) in response to a call by the World Bank and the International Monetary Fund to grant debt-service suspension to the poorest countries to help them manage the severe impact of the COVID-19 pandemic). The initiative was initially in force till end of 2020. The United Nations Secretary-General has been forcefully advocating that the DSSI must also entail a broadening of the Initiative’s scope to all vulnerable, developing and middle-income countries.
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Indian Finance Minister Nirmala Sitharaman, who participated in today’s meeting, talked about addressing the debt vulnerabilities of low income countries. She observed that in a longer term, a more structural treatment of debt was required. She emphasised that this process should primarily be guided by the objective of helping such countries overcome the fiscal stress caused by the pandemic.
Sitharaman underlined that it would be important to take into consideration the circumstances and concerns of both creditors and debtors and that in the process of debt restructuring, care must be taken to not saddle the debtor countries with overly burdensome conditionalities.
Explaining the core guiding principles for the updation of the G20 Action Plan commitments, Sitharaman highlighted the need to balance the health and economic objectives in the recovery plans. Adding to this, the Finance Minister also spoke about the need to consider heterogeneity of policy responses among member countries, international spillovers from domestic policy actions and reforms required in the global regulatory regimes particularly with respect to the procyclicality of credit rating downgrades.
– globalbihari bureau
