The G20 countries agreed on a common framework for restructuring government debt for the world's poorest countries, who are struggling to pay and in need of relief in anticipation of the corona crisis.
G20 finance ministers said Friday that more assistance is needed than the current temporary debt freeze, which will be extended until June 30, 2021, as the pandemic spreads to the finances of some developing countries.
China and Major creditors are expected to follow common guidelines agreed on by the G20 that outline ways reduce or reschedule debt. G20 partners also criticized China for not including debt owed to its state-owned banks.
The pandemic has caused devastation and panic for the world's poorest countries, of which 50% are at risk a debt crisis, namely Zambia, which is on the verge of becoming Africa's first sovereign default country.
The Director-General of the International Monetary Fund (IMF), Kristalina Georgieva, said last week that African countries alone face a financing gap of $345 billion until 2023 to deal with the pandemic and its impact on the economy.
However, China, which accounts for 63% of the total debt owed to the G20 countries, has been reluctant to acknowledge the need for debt cancellation or reduction altogether.
Both creditor countries and private sector creditors will negotiate with the debtor country, which is expected to seek the same terms of relief under the new framework.
G20 finance ministers said the new framework aims to facilitate timely and orderly debt handling for countries eligible for a debt freeze, which only included private sector creditors on a voluntary basis last April.
Japanese Finance Minister Taro Aso told reporters after a G20 conference that debt transparency is very important, describing the agreement as 'historic', and adding that all stakeholders must ensure that the common framework is implemented.
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