Countries under the G20 group of major economies have agreed to put on hold debt payments by poor countries, following a meeting by G20 finance ministers and central bank governors.
The pandemic has led to a marked increase in government spending on health and effort to curb the spread of the viral infection. COVID-19 control guidelines have made governments to impose shutdowns on cities, placing several economies at risk of being crippled and making debt repayment and servicing difficult.
To help its debtors deal with the health and economic effects of the pandemic without being stifled by debt repayment, the G20 countries on Wednesday agreed to debt payment suspension for poor countries for a defined period of time subject to renewal.
“We support a time-bound suspension of debt service payments for the poorest countries that request forbearance,” the G20 said in a communique. “We agreed on a coordinated approach with a common term sheet providing thee key features for this debt service suspension initiative, which is also agreed by the Paris Club.”
The agreement will be renewable thereafter, based on a joint analysis by the World Bank and the International Monetary Fund of the debt sustainability of those countries that receive debt relief, a source familiar with the issue told Reuters.
About 77 poor countries, forty of which are in Africa would benefit from the initiative, according to CNBC.
According to the Debt Management Office, Nigeria’s bilateral creditors — China, France, Japan, and India – are all G20 members. Nigeria owes China $3.2 billion (N1.2 trillion), about 80% of the country’s debt while other countries are jointly owed $672 million. Debt service payment to China in 2019 by Nigeria was $138.8 million (N53.7 billion).
Nigeria’s economy which is dependent on oil has taken a hit from the pandemic and crash in global oil price, forcing the authorities to review its budget for 2020.
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