- G20 acts
The G20 countries have paved the way for the multilateral donors, as well as the G7 countries, to give the world’s 76 most highly indebted countries debt relief by themselves deciding to postpone their debt repayments for a year. This is not a debt write-off, as had been suggested by some heavily indebted countries, but does mean that the payments that were due this year have been thrown forward. The G20, which includes the world’s 20 largest economies, also includes the G7, which are the world’s seven largest economies, and thus not just the biggest bilateral lenders, but the biggest contributors to the multilateral lending institutions. The G20 countries hope that the benefiting states will not only be freed from the burden of raising the foreign exchange needed to pay their debt, but will use the money thus freed up to spend on measures to combat the coronavirus pandemic.
The G20 countries have not done as much of a favour as they might like to pretend. The only solid step emerging from the decision is that there will not be a slew of defaults. The affected countries have no means of obtaining the money needed, because exports have collapsed along with the rest of international trade, especially of primary products, which provide the sole income for many countries. Pakistan shows the problem faced by countries which also rely on workers’ remittances for their foreign exchange. Workers are being thrown out of work abroad as well, which means the remittances are going to be much lower than usual, and it would have been increasingly difficult, perhaps ultimately impossible, to meet a payment schedule set in less stressful times.
However, Pakistan’s debt managers should not go overboard. It is true that the moratorium indicates how long the G20 thinks it will take the world economy to get back on track, and enable the indebted countries to start repayments again. If things do not go according to plan, the G20 has said it is willing to ‘amplify its efforts’. However, it should give us pause that Pakistan and North Korea are the only two nuclear powers not in the G20. Instead, Pakistan is likely to be alongside some of the poorest and worst-run countries in the world to benefit from this relief.
