In a recent update, the finance ministers from G20 countries are holding a meeting by end of April, 2020 to finalize the deal regarding moratorium on loan repayments of 76 poor economies. The meeting is expected to settle a debt deal with freezing of sovereign debt repayments for 6 to 9 months or possibly till next year. During the time deferred for payments, finance ministries from the multilateral institutions will decide future policies for each individual economy based on their state.
Last month, Prime Minister Imran Khan was among the first leaders to call upon IMF, World Bank and other multilateral institutions from rich economies to provide moratorium to struggling economies like Pakistan in light of COVID-19. Later, IMF and World Bank called upon the richest 20 nations to freeze loan repayments for 76 poorest nations while the economies strive with economic and health destruction due to coronavirus.
In addition, organizations like Australian Civil Society called for their government to use its influence with G20 and IMF to permanently cancel debt repayments of poorest nations with gross income per capita lower than $1,175.
The officials from G20 summit are confident that all member countries will come to a consensus regarding this debt deal. China is the biggest bilateral lender to International Development Association funding (IDA) and has been reluctant in past to bend any rules regarding its debtors. However, Odile Basso, chair of Paris group asserted that there is no disagreement amongst the G20 members regarding solving this global crisis and the deal is almost confirmed to close end of this month.
PM Imran Khan has been consistent with his appeals to lending institutions including IMF, World Bank, UN Secretary General and G20 nations to consider the state of developing countries and help out in this time of crisis with financial aid as well as moratorium on bilateral debts.
This debt deal will be a major relief for crumbling economy of Pakistan. Pakistan’s public debt with more than Rs. 33 trillion, stands at around 85% of its GDP and with loan liabilities added to it, the rate exceeds its GDP. It is beyond the debate that highly indebted countries have little space for relief policies and to worry about their debts that amounts to over $130 billion to external creditors this year alone, the impact of coronavirus can be devastating.