G20 finance ministers have for the first time agreed a new common framework for restructuring government debt, amid concerns poorer countries will need unprecedented debt relief packages in the wake of the coronavirus crisis.
Major creditors including China are expected to follow the fresh guidelines, which set out legislation to reduce or reschedule debt deemed unsustainable.
China accounted for 63 per cent of overall debt owed to G20 countries in 2019, according to World Bank data.
Creditor countries will negotiate revised debt agreements with debtor countries under the new framework, Japanese finance minister Taro Aso said today.
Nations seeking debt relief are expected to seek the same treatment terms from private sector creditors.
In a joint statement following the virtual G20 meeting today, finance ministers said the framework aims “to facilitate timely and orderly debt treatment” for the world’s poorest nations.
It comes after UN secretary-general António Guterres yesterday pushed G20 leaders to expand debt service suspension to help developing and middle-income economies recover from the coronavirus pandemic.
Addressing a virtual annual ministerial meeting, Guterres said: “Many developing countries are suffering from severe liquidity crises related to skyrocketing debt” and the scope of the G20 Debt Service Suspension Initiative “must be expanded to all developing and middle-income countries that are in need.”
The Debt Service Suspension, which offers a temporary suspension of government-to-government debt payments to 73 developing countries, was approved in April.