G-20 Debt Service Suspension Initiative: Key Facts
On October 1, 2020, the officials of the International Monetary Fund (IMF) called for the extension of G20 Debt Service Suspension initiative till the end of 2021.
What is Debt Service Suspension Initiative?
The DSSI means that for a limited period of time, the debt service payment from poorest countries are suspended upon the request from the countries. This will help these countries to address immediate liquidity needs. The poorest countries are the low-income and low middle-income countries.
As of August 2020, 60% of eligible countries have made requests. This amounts to 5.3 billion USD. India is a low middle-income country. Therefore, India is eligible to claim the suspension.
Recently, under the DSSI of G-20, India agreed to provide relief to Myanmar. In simple terms, Myanmar can repay loans bought from India under G-20 initiative after 2020 or which ever time is being fixed. This decision was taken during the 19th round of Foreign Office Consultations that was held between India and Myanmar on October 1, 2020.
How long will the debt service suspension last?
The suspension is to be provided till 2020 as of now. The IMF and World Bank have agreed to extend their support to DSSI.
What is the need for extension?
According to the IMF officials, the debt crisis of the COVID-19 pandemic will keep increasing if the required changes are not made to international debt architecture. If suspended, the money can be used to ease financial constraints being brought in by COVID-19. This will free up scarce money that can be used to mitigate economic and human impacts of the pandemic. On these terms, the IMF insists on extending the debt service suspension of G-20.
The officials believe that more transparency should be brought in government borrowing.
Role of IMF and World Bank in DSSI
These two international financial organisations are providing technical support to the DSSI.