3 Minutes to Read (Reuters) – WASHINGTON (Reuters) – A White House official said on Wednesday that the G20 big economies should revive a ban on formal bilateral debt payments by the poorest countries to include middle-income countries and extend involvement by China and the private sector. China was by far the largest official bilateral creditor, according to Daleep Singh, the US sherpa for the G7 and G20, and it should step up its involvement in the G20’s Debt Service Suspension Initiative (DSSI), but greater private sector participation was also needed. The Group of 20 agreed in April to extend the debt freeze offered to the poorest countries until the end of 2021 in order to aid them in fighting the COVID-19 pandemic and mitigating its economic impact, but failed to extend it to middle-income countries, leaving 22 of the 72 countries at high risk of debt distress out. Some countries were hesitant to seek for a debt payment freeze for fear of destroying their credit ratings, therefore the campaign fell far short of its stated goals. “Every country, especially the major lenders, must do their part,” Singh said at a Center for Strategic and International Studies online event. “A lot of China’s loan activity is quite opaque, and it self-classifies much of it as commercially driven, despite the fact that it’s plainly directed by the government,” he said. According to Singh, it’s also critical to boost the private sector’s incentives to shoulder the burden of debt reduction for low- and middle-income countries. “International institutions’ public assistance should not be used to repay the private sector, and I believe the private sector needs to accept the truth that developing market investing is not a free lunch,” he said. The White House official also stated that it was critical to “lift the stigma” associated with highly indebted countries seeking deeper debt restructuring, which was required in many cases to make room for structural changes. Only three countries have asked for deeper debt restructuring within a shared framework agreed upon by the G20 states and the Paris Club of formal bilateral lenders so far: Ethiopia, Chad, and Zambia. When the G20 finance ministers gather in Venice on July 9-10, they will examine the approaching debt crisis affecting underdeveloped countries and emerging markets. According to the Institute of International Finance, developing market debt reached a new high of more than $86 trillion in the first quarter. Andrea Shalal contributed reporting; David Lawder contributed additional reporting; and David Gregorio edited the piece./n
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