Extended financial support for vulnerable nations requested
CALLS for action to support more vulnerable nations on improved access to financing and debt sustainability were made with one voice yesterday in a joint statement from the Commonwealth Finance Ministers.
The statement made on behalf of all 54 member countries of the Commonwealth, was the first of its kind in over a decade. It called on the G20, Paris Club, World Bank and the International Monetary Fund (IMF) to extend financial support to vulnerable nations, given the deep and widespread economic impact of the COVID-19 pandemic.
“We welcome the G20 COVID-19 Action Plan, released in April, which includes the suspension of debt service payments by the poorest countries in 2020 through the Debt Service Suspension Initiative (DSSI). We call for an extension of the DSSI for additional liquidity, and welcome capacity building support from International Financial Institutions (IFIs) for all member countries in need.”
The Finance Ministers expressed support of the rapid response of the IFIs to help members tackle the crisis and encourage their policy flexibility, and called for the recognition of the special needs of small states, given their particular vulnerabilities.
“We call on the G20 to work with the Paris Club of official creditors to develop a clear and co-ordinated process for delivering debt treatments for countries with debt vulnerabilities, working closely with the IMF. We call for existing debt reduction initiatives to include debt to private sector creditors. To this end, we call on private sector creditors to join the G20 DSSI.”
The statement alluded to the economic impact of COVID-19, which has seen countries around the world implement much-needed fiscal stimulus packages to address the emerging health and economic crises, and Commonwealth nations debt levels are expected to rise significantly as a result.
“This presents a significant risk to those countries’ debt sustainability, with 14 Commonwealth countries already at high risk of debt distress even before the impact of the COVID-19 pandemic.”
Speaking on the issues raised at the Commonwealth Finance Ministers Meeting, Commonwealth Secretary-General Patricia Scotland said: “This is not an issue we can ignore or wish away, and failure to acknowledge and tackle the real fiscal challenges many nations are facing right now will put economies, livelihoods and communities at real risk.
“We need to recognise that these issues are so widespread and are faced by so many nations that they have the potential to develop into a systemic risk threatening all our prosperity and that it is in the interests of us all to act decisively to support more vulnerable economies now.
“Our member states are clear on what they need: action on forging an extension of the G20 Debt Sustainability Suspension Initiative (DSSI) to 2021, and consideration of how we expand eligibility for support to include not only low-income countries, but all vulnerable member states.
“If we are to build forward better from this crisis, while also tackling other long-term challenges we face such as climate change, we look to the G20, World Bank and IMF to show the leadership and vision that is needed and find ways of working together to support the global economy and protect all of our future prosperity.”
The statement of Commonwealth Finance Ministers comes ahead of the G20 Finance Ministers and Central Bank Governors meeting on October 14 when major decisions on the lifespan of the G20 debt relief initiative and on its eligibility criteria will be tabled. Currently, only low-income countries are eligible for the DSSI, which ends December 2020. Commonwealth countries have been pressing for an extension of the DSSI and an expansion of eligibility criteria to include all small and vulnerable member countries.
This is the first time that Commonwealth Finance Ministers have issued a joint statement since 2009 when Ministers joined forces to tackle the global financial crisis.