The International Monetary and Financial Committee has agreed to create a common framework for handling sovereign debt treatments beyond the Debt Service Suspension Initiative.
Kristina Georgieva, Managing Director, International Monetary Fund, said on Thursday at the 2020 IMF Fund/World Bank virtual annual meetings.
According to Georgieva, there were two significant ‘deliverables’ from the G20 which were endorsed by the IMFC, and that the framework would be an important advancement in the international architecture for resolving sovereign debt matters in an orderly way.
“As you may recall, the IMF has raised several issues with improving the architecture so we can have fair, quick, relatively simple, relatively low-cost resolution of unsustainable debt. This common framework is a significant step in the right direction,” she said.
Also, she said the IMFC had agreed to an extension by the G20 of the DSSI for at least another six months from the end of 2020 and for the option to extend it further if necessary.
She said, in addition to the two deliverables, three broad policy areas earlier discussed included that countries should continue with essential measures to protect lives and livelihoods.
“Stepping up vital health measures is imperative, as is well-targeted fiscal and monetary support to households and firms. So, the IMF’s message from these meetings is clear: avoid premature withdrawal—pulling the plug too soon risks serious, self-inflicted harm,” she added.
According to her, the second is to build a more resilient and inclusive economy, noting that public investment, especially in green projects and digital infrastructure can be a game-changer as the policy area has the potential to create millions of new jobs, while boosting productivity and incomes.
She said the third policy area was for countries to deal with debt, global public debt was projected to reach a record high of 100 per cent of Gross Domestic Product in 2021.
“This is partly because countries rightly need to boost spending to fight the crisis and secure the recovery. Addressing this issue over the medium-term will be critical, but for many low-income countries, urgent action is required now,” she said.
The IMF boss, however, stressed that strong international cooperation was needed especially on vaccine development and distribution, and that faster progress on medical solutions could speed up the recovery and could add almost $9tn to global income by 2025, which in turn could help narrow the income gap between richer and poorer nations.
Georgieva added that the IMFC also supported Net Present Value neutral, time-bound suspension of principal and interest payments for eligible countries that make a formal request for debt relief from their official bilateral creditors were part of the support.
