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COVID 19: Debt Service Suspension Initiative

In April, the World Bank’s Development Committee and the G20 Finance Ministers endorsed the Debt Service Suspension Initiative in response to a call by the World Bank and the IMF to grant debt-service suspension to the poorest countries to help them manage the severe impact of the COVID-19 pandemic.

Debt-service suspension with broad and equitable participation is urgently needed to allow low-income countries to concentrate their resources on fighting the pandemic. The G20 called on private creditors to participate in the initiative on comparable terms.

COVID-19 has triggered the deepest global recession since World War II. The main goal of the DSSI is to allow poor countries to concentrate their resources on fighting the pandemic and safeguarding the lives and livelihoods of millions of the most vulnerable people.

The IMF and the World Bank are supporting the implementation of the DSSI—by monitoring spending, enhancing public debt transparency, and ensuring prudent borrowing. A key objective of the DSSI is to enable an effective crisis response. Borrowers therefore commit to use freed-up resources to increase social, health, or economic spending in response to the crisis.

Beneficiaries also commit to disclose all public sector financial commitments (involving debt and debt-like instruments). Sound data on public sector financial commitments will improve assessments of debt sustainability and financing needs. Greater debt transparency is critical to help countries make more informed borrowing and investment decisions and to attract foreign direct investment.

Under the DSSI, countries also commit to limit their non-concessional borrowing as supported by ceilings under IMF programs and the World Bank’s non-concessional borrowing policies.[…]