Vice Minister of Finance Zou Jiayi. (Photo / bundsummit.org)
Measures to ease the burden on poor countries and boost sustainable development
China is implementing debt relief plans promoted by the Group of 20 to help ease the debt burden of poor countries and achieve sustainable development during the novel coronavirus outbreak, senior official said of the government.
As many poor countries face challenges related to sustainable debt issues, joint efforts and cooperation are needed among countries, and multilateral development institutions should innovate in financing methods to provide long-term funds. , stable and low-cost, Vice Finance Minister Zou Jiayi said at the press conference. a recent peak.
China is taking “concrete” steps to fully align with G20 debt relief plans and help indebted countries, she said.
“The COVID-19 pandemic continues to spread in some emerging and low-income countries, leading to economic recession, currency depreciation, imbalanced fiscal revenue and expenditure, and growing debt. The sovereign rating of some countries is on the verge of falling, which will increase the pressure on debt sustainability, ”Zou said.
The official urged the International Monetary Fund to increase the general allocation of its Special Drawing Rights, IMF units on the basis of a basket of prominent currencies that can increase foreign exchange reserves and purchasing power of all members, in order to help developing countries in particular to improve their international payment capacity and to fight against the shocks of the COVID-19 crisis.
International financial organizations can help countries prevent financial risks, explore regulatory policy frameworks that encourage the financial sector to serve the real economy, and support medium and long-term financing, the official said.
“Essentially, the debt problem is linked to development problems, which should prevent the liquidity crisis in the short term and ensure adequate capital in the long term.”
The sharp rise in pandemic-related spending and rising debt have raised concerns, especially for poorer countries, as debt may exceed their ability to repay. According to IMF data, global fiscal stimulus packages may have reached $ 12 trillion, and the average deficit ratio is expected to increase by 9 percentage points from last year.
G20 finance ministers and central bank governors agreed to extend the Debt Service Suspension Initiative for six months at a virtual meeting on October 14, allowing eligible countries to suspend official payments bilateral debt service until the end of this year. They also confirmed that a further six-month extension is possible if the economic and financial situation so requires.
Not only the Chinese government but also major Chinese financial institutions are participating in the G20 debt relief plans, which have several achievements, according to Zhou Xiaochuan, former governor of the People’s Bank of China, the central bank. “Future development will be based on free trade and investment, as well as multilateralism.”
Debt restructuring may not be a good way to solve the problem, said Zhou, who said it was difficult to establish a common framework for all borrowers and lenders. His comments are a response to the G20’s latest call to prepare a common framework on debt restructuring, as some members see it as a move to ensure that bilateral lenders share the burden equally and make debt relief conditional. the condition that borrowers seek the same treatment from banks and bondholders.
As the pandemic so far is much worse than most people imagined, “this means that many developing countries and emerging markets will be unable to pay what they are owed. The G20’s initial response was a reprieve, but the reprieve is not enough. “said Joseph Stiglitz, professor at Columbia University and Nobel laureate in economics.
“But immediately, we must do something for the many countries facing a debt crisis. This is where cooperation between all creditors is absolutely necessary,” Stiglitz said. “Unless the debt restructuring is deep enough to ensure that the remaining debt is sustainable, we will soon have another debt crisis.”