Finance Minister Nirmala Sitharaman said that there is a need for more structural treatment of debt in the long term.
Addressing the G20 Finance Ministers and Central Bank Governors Meeting, through video conference, “The process should primarily be guided by the objective of helping such countries overcome the fiscal stress caused by the pandemic,” Finance Ministry statement said.
Sitharaman underlined that 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.
The ministers and Governors of G20 countries had gathered to discuss the current global economic outlook and G20’s response to the Covid-19 pandemic, along with other G20 Finance Track priorities for the year 2020.
In the first session, the Finance Minister spoke on updates to the G20 Action Plan in response to Covid-19 which was endorsed by the G20 Finance Ministers and Central Bank Governors on April 15. Sitharaman emphasised that the 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.
Explaining the core guiding principles for the updation of the G20 Action Plan commitments, she highlighted the need to balance the health and economic objectives in the recovery plans.
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 pro-cyclicality of credit rating downgrades.
A key outcome 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. The initiative was initially in force till end of 2020.
During this meeting, in light of the continued liquidity pressures, the G20 Finance Ministers and Central Bank Governors agreed to extend the DSSI by 6 months, and to examine by the time of the 2021 IMF/WBG Spring Meetings if the economic and financial situation requires a further extension.