WASHINGTON (Reuters) – Group of Seven finance ministers on Monday called for the full implementation of the G20 freeze on debt service payments by all official bilateral creditors, amid mounting pressure on banks and Chinese state-owned enterprises to join the relief effort.
During a teleconference Monday morning, G7 ministers stressed the need for greater transparency on loans, a spokesperson for the US Treasury said, an apparent reference to confidentiality clauses included in many Chinese loans to developing countries in Africa and elsewhere.
Ministers discussed national and international economic responses to the coronavirus pandemic and strategies to reverse a deeper-than-expected slowdown in the global economy, ahead of a virtual meeting of finance officials from the Group of 20 advanced economies on Saturday.
G20 members, including China, and the Paris Club of official creditors in April proposed a freeze on debt service payments to the 73 poorest countries until the end of the year to free up about 12 billion dollars in funds to fight the epidemic. But implementing the Debt Service Suspension Initiative (DSSI) has proven difficult, and the unexpected slowdown in the global economy has prompted calls for the extension and extension of the moratorium.
China’s refusal to include its Chinese Development Bank and state-owned enterprises in the suspension of debt payments and concerns over confidentiality agreements included in many Chinese loans to African countries have slowed progress in l execution of the debt freeze, according to economists.
Private sector participation has also been low.
A senior US official said G7 ministers discussed the need for China to participate fully and transparently in the global initiative.
“This is the key, both to realizing the full potential of DSSI and from a transparency standpoint,” the official said.
To date, 41 countries have requested DSSI assistance and the Paris Club has signed agreements with 20 countries ranging from Côte d’Ivoire to Ethiopia and Pakistan.
World Bank President David Malpass said transparency was vital to facilitate work on debt restructurings and help reconcile debtor-creditor data.
“It is important that the G20 widens the scope of the debt suspension initiative, extends it and that commercial creditors join in,” he said Monday in a statement to Reuters.
Malpass last week supported an extension of the debt payment freeze until 2021 and the need for increased transparency on lending and said all official bilateral creditors, including political banks such as the Bank of development of China, and state-owned enterprises with implied government guarantees should participate.
Reporting by Andrea Shalal and David Lawder; Editing by Dan Grebler and Leslie Adler