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Steps toward debt relief for poor countries not enough, Christian Aid warns

by Tola Mbakwe

Christian Aid has expressed cautiousness over the G20's new plan to restructure debt for the world's poorest countries. 

In light of the financial impacts of the coronavirus crisis, G20 finance ministers agreed on a new joint framework for restructuring government debt in some poorer countries called 'Common Framework for debt treatments' on Friday. 

While Christian Aid has welcomed the progress, it says private sector creditors should be included and quicker action must urgently be taken. 

"We welcome the fact that today G20 leaders have created a process for debt relief for 73 of the poorest countries, including the inclusion of private sector creditors on a case by case basis on comparable terms," Matti Kohonen, Christian Aid's principal advisor on the private sector, said .

"This is a big step forwards. However, private sector creditors should be included on a mandatory basis.

"Also, worryingly, this does not include debts owed to the multilateral lenders such as the World Bank or the IMF who are major lenders in the poorest countries. With a risk of multiple and simultaneous debt crises on the horizon, we should have quicker action."

Christian Aid welcomed the decision at the G20 Finance Ministers meeting last month to extend the Debt Servicing Suspension Initiative (DSSI) for another six months, but was concerned over private banks profiting from the ongoing international crisis which risks trapping people in the poorest countries into more poverty.

Christian Aid's 'Under the radar' report shows that HSBC, BlackRock and other banks are being paid in full, while bilateral creditors have accepted a payment holiday for 14 months.

The charity said most private sector debt remains "under the radar" and lacks transparency. The report found that in Zambia only $295 million of the $1bn of total bondholders could be found, with the rest not accessible on databases.

Christian Aid has warned that many developing countries will find it hard to deal with the financial burden of the Covid-19 pandemic if a more ambitious debt cancellation is not agreed.

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