Debt assistance worth $2.1b given to poor nations, says finance minister

China has provided debt relief worth $2.1 billion to lower-income countries under the G20 framework, the highest among G20 members in terms of deferral amount, Finance Minister Liu Kun said on Friday.

China is the leader among G20 members in terms of the debt relief amount, and this is "an important deliverable for the upcoming G20 Leaders' Summit", the minister said. Reiterating that China will continue to help the world's poorest countries, Liu said the focus would be on tackling debt-related issues and bolstering economic and social recovery.

The G20 debt relief plan aims to enable lower income countries to free up more fiscal space for increasing social, health or economic spending, and meet the short-term liquidity needed to cope with the COVID-19 pandemic, experts said.

As official bilateral creditors, the China International Development Cooperation Agency and the Export-Import Bank of China have implemented all eligible debt suspension requests of the developing nations. The total debt service payments suspended amount to $1.353 billion, with 23 countries benefiting from the initiative, the finance minister said.

The China Development Bank, as a commercial creditor, has also responded to the G20 debt relief initiative, and signed agreements with beneficiaries involving $748 million.

Urging multilateral creditors, including the World Bank Group, to provide positive net inflows to eligible countries under the debt suspension agenda, Liu urged them to be a part of the debt treatment process even beyond the initiative.

"China will provide assistance to developing countries in their efforts to combat the COVID-19 pandemic and achieve economic, social recovery and bolster development to the best of our ability through bilateral and multilateral channels," Liu said in a written interview.

The interview was published ahead of the G20 leaders' virtual summit over the weekend. During the two-day event, the G20 leaders under the presidency of Saudi Arabia will contemplate ways to sustain global economic recovery, despite the COVID-19 pandemic.

Earlier this month, finance ministers and central bank governors of the group proposed a debt relief plan and a common framework for leaders to solve the debt issues of the world's poorest countries.

This is the first time in G20's history that countries have jointly participated in multilateral debt treatment mechanisms. China is participating in a multilateral debt coordination process for the first time. With the global economy sliding into recession against the backdrop of continued spread of COVID-19, the liquidity difficulties of many poor countries may evolve into a solvency crisis, experts said.

In April, a meeting of the G20 finance ministers and central bank governors agreed to suspend debt repayments of the poorest nations falling due from May 1 to the end of the year. They also achieved a consensus in October to extend the debt repayment to June 30, 2021, and to examine, by the time of the 2021 Spring Meetings of the International Monetary Fund and the World Bank Group, whether the economic and financial situation requires a further extension of the initiative by another six months.

"China took the lead in calling for and supporting the extension of the Debt Service Suspension Initiative," said Liu.

Liu called on the World Bank Group to take part in debt treatments and explore various options to provide more support to the poorest countries in alleviating the debt burden.

"If the World Bank Group takes part in debt treatment by setting up a multilateral debt relief facility, China will positively consider contributing to the facility as such to help ease the debt burden on the poorest countries," he said.

According to World Bank Group report-International Debt Statistics 2021-multilateral creditors account for almost 50 percent of eligible countries' total public and publicly guaranteed debt.