G7 calls on bilateral creditors to extend the suspension of debt service to poor countries until 2021
At the end of their meeting held on Monday August 17 by video conference, the G7 finance ministers urged all official bilateral creditors to extend their G20 “Debt Service Suspension Initiative” (DSSI) until 2021. for low-income countries, reports Agence Ecofin.
During this meeting, which was organized by US Treasury Secretary Steven Mnuchin, G7 finance ministers even agreed to consider additional options for the poorest countries.
The leaders of the World Bank and the International Monetary Fund, present at these discussions, also supported this call, taking into account the economic impact of the covid-19 health crisis on low-income countries, the same source said.
Recall that the members of the G20, including China, and the Paris Club of official creditors adopted last April the Debt Service Suspension Initiative, against 73 poor countries until the end of the year following the covid-19 pandemic which broke out in the first quarter of 2020.
This G20 action should allow the poorest countries to release a fund estimated at 12 billion USD to fight against the pandemic and mitigate its impact on their already fragile economies even before the health crisis.
Debt service is the amount that the borrower has to pay each year to honor his debt. It should not be confused with the debt burden, which covers only the weight of interest alone. This sum has two parts: the interest which is calculated by applying an interest rate to the outstanding capital (the sum which has not yet been repaid). This interest rate was fixed at the time of the loan; the principal, that is to say the amount of borrowed capital which is repaid each year (annuity). This amount therefore depends on the duration and the total amount of the loan (for example one can repay a tenth of the debt for ten years).
