Nigeria and 75 other countries have been granted debt service relief by the World Bank and China.
The debt service waiver was granted by G20 countries at the end of their meeting on Wednesday, a source who was privy to the discussion said. The debt service relief translates to Nigeria not being liable to service some of her debts for the rest of the year.
“We will benefit to the extent that the principal and interest repayments falling due which to our understanding is a debt service suspension (not forgiveness) until the end of 2020.” The source who asked that his identity be veiled because he was not authorised to comment, said the benefit to Nigeria “will be the fiscal space created through debt rescheduling and interest payments which we are obligated to countries like China and also the World Bank.”
The source said at the end of the meeting in Saudi Arabia on Wednesday. “The G20 expressed support for a time-bound suspension of debt service payments for the poorest countries that request forbearance.”
“They agreed on a coordinated approach with a common term sheet providing the key features for this debt service suspension initiative, which is also agreed by the Paris Club”.
All bilateral official creditors, the source added, “were directed to participate in this initiative, consistent with their national laws and internal procedures.”
The G20 cautioned that “international support is needed to help countries combat the COVID-19 outbreak and its health and economic impacts.” They added that “important steps have already been taken by the International Monetary Fund (IMF), World Bank, Regional Development Banks and central banks, but more needs to be done.”
The G20 agreed to undertake the following actions and commitments to secure adoption and swift implementation of a strong financial response to help countries in need and uphold global financial stability.
First on the list of actions to be undertaken by the G20 would be to “support the IMF’s crisis response package and readiness to mobilise $1 trillion lending capacity.”
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The G20 group said it will support “the decisions taken to streamline procedures, enhance access to emergency financing, including a temporary doubling of the annual access limits, and make full use of existing instruments.”
The group is also in agreement with “the adoption of a Short-Term Liquidity Line, including a review in 2022, for members with very strong fundamentals and policies.”
The group called “on the IMF to explore additional tools that could serve its members’ needs, drawing on relevant experiences from previous crises.”
The G20 welcomed the steps already taken by countries to implement the necessary domestic measures that are needed to maintain the IMF’s current resource envelope and urge others to act swiftly.”
The group called for a “swift implementation of the emergency response packages adopted by the World Bank and Regional Development Banks which amounts to more than $200 billion for emerging and low-income countries.”
The G20 encouraged Multilateral Development Banks (MDBs) to work closely together and with development partners at the country level to ensure consistency, optimise the use of resources, ensure debt remains sustainable and maximize the development impact.”
The three key items that were addressed at the virtual meeting which had in attendance finance ministers and central bank governors are: “Empowering People, by creating the conditions in which all people – especially women and youth – can live, work and thrive”; “Safeguarding the Planet, by fostering collective efforts to protect our global commons”; and “Shaping New Frontiers, by adopting long-term and bold strategies to share benefits of innovation and technological advancement.”
The G20 is made up of 19 countries and the European Union. The 19 countries are Argentina, Australia, Brazil, Canada, China, Germany, France, India, Indonesia, Italy, Japan, Mexico, Russian Federation, Saudi Arabia, South Africa, South Korea, Turkey, UK and the United States (U.S.).