Finance Minister Nirmala Sitharaman said the International Monetary Fund’s debt restructuring programme should aim at helping the countries overcome the fiscal stress caused by the coronavirus pandemic.
“…it would be important to take into consideration the circumstances and concerns of both creditors and debtors and that in the process of debt restructuring, care must be taken to not saddle the debtor countries with overly burdensome conditionalities,” she said while addressing the G20 Finance Ministers and Central Bank Governors Meeting through video conferencing.
One of the key outcomes of the G20 Action Plan has been the Debt Service Suspension Initiative (DSSI) which provides time bound suspension of debt service payments for the low-income debtor countries that request forbearance, a finance ministry statement said.
The initiative came into effect in April was initially agreed till end of 2020.
During this meeting, in light of the continued liquidity pressures, it said the G20 finance ministers and central bank governors agreed to extend the DSSI by six months, and to examine by the time of the 2021 IMF/World Bank Group Spring Meetings if the economic and financial situation requires a further extension of the initiative.
To receive DSSI relief, countries are required to apply for an arrangement with the International Monetary Fund (IMF) which could be either a regular programme or a shorter-term emergency facility.
Talking about addressing the debt vulnerabilities of low income countries, Sitharaman observed that in a longer term, a more structural treatment of debt is required.
She emphasised that this process should primarily be guided by the objective of helping such countries overcome the fiscal stress caused by the pandemic.
Addressing her counterparts, Sitharaman highlighted the need to balance the health and economic objectives in the recovery plans.
Besides, the finance minister also spoke about the need to consider heterogeneity of policy responses among member countries, international spillovers from domestic policy actions and reforms required in the global regulatory regimes, particularly with respect to the procyclicality of credit rating downgrades.
Updated commitments in the G20 Action Plan have to be kept relevant in the current policy context for the action points to remain effective as a policy response to COVID-19, she added.
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