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Haruhiko Kuroda, governor of the Bank of Japan, and Taro Aso, Japan's deputy prime minister and finance minister, Fukuoka, Japan 9 June 2019 (Photo: Reuters/Kim Kyung-Hoon)

Author: William N Kring, Boston University

As the more lethal and contagious Delta variant of COVID-19 rips across the globe, the prospects of multilateral efforts to combat the virus, tackle the looming global debt crisis and mount a sustainable economic recovery are dim. Nowhere is the insufficiency of the multilateral response more apparent than on the issue of debt relief.

Before the crisis, 46 countries were spending more of their resources on debt service payments than on health care. As the COVID-19 pandemic began to wreak havoc on the global economy, the G20 responded by announcing the Debt Service Suspension Initiative (DSSI) during World Bank and IMF meetings in April 2020. The DSSI allowed low-income countries (LICs) to temporarily suspend their debt payments through to December 2020, a measure that has since been extended through to December 2021.

The DSSI has been criticised for failing to compel all creditors to participate. Of 73 eligible LICs, only 45 beneficiary countries have sought to suspend debt payments to official bilateral creditors. Since only a limited scope of debt service is covered, deferred debt service through July 2021 totalled only US$4.6 billion.

In April 2021, the G20 also developed a ‘Common Framework for Debt Treatment beyond Debt Service Suspension Initiative (DSSI)‘ to facilitate negotiations over debt restructuring for LICs. While the measures adopted by the G20 are unprecedented, only Chad, Ethiopia and Zambia have applied for the framework and restructuring measures have not gone nearly far enough. LICs that apply for the framework are likely to be downgraded, as Ethiopia recently experienced.

Despite these shortcomings, the communique released following the July 2021 …continue reading