WASHINGTON: The Group of 20 major economies stated on Thursday that the risk of a systemic debt crisis appears broadly contained but many vulnerable low- and middle-income countries still face high financing costs and growth limitations.
G20 finance officials issued a debt declaration during the annual International Monetary Fund and World Bank meetings calling for further work to boost debt sustainability and increase transparency.
The leaders pledged to continue strengthening the G20 Common Framework for Debt Treatments in a predictable and coordinated manner while noting several borrowing countries require further international assistance.
This commitment comes amid indications from senior IMF and World Bank officials that the emphasis is now on countries growing their way out of debt rather than holding out for debt relief.
The G20 declaration represents its first separate communique on debt since the Covid-19 pandemic and was highly anticipated given huge development aid cuts by the United States and other rich nations.
Some debt relief activists immediately criticized the declaration as inadequate and unambitious in addressing the worst debt crisis the world has ever seen.
Iolanda Fresnillo with the European Network on Debt and Development said the statement included no new initiatives and revealed the G20’s shortcomings for addressing real crises.
Eric LeCompte of Jubilee USA Network noted developing countries spent 921 billion dollars on interest payments alone in 2024 representing a 10% jump from 2023 with more increases expected this year.
He observed consensus exists around the severity of debt payment challenges but not yet on how to solve them since countries cannot borrow their way out of this crisis.
Duncan Pieterse from South Africa’s National Treasury said G20 officials agreed to further strengthen borrowing countries’ voices in debt discussions as a key demand of South Africa’s G20 leadership.
He acknowledged progress on Common Framework restructuring cases with faster resolutions than early examples like Chad but emphasized more work remains necessary.
Pieterse confirmed debt remains on the G20 agenda for further refinement including how preferential creditor status is handled during restructuring processes.
Top United States and Chinese officials joined a Global Sovereign Debt Roundtable meeting where participants underscored their continued commitment to address persistent developing country debt issues.
Global debt stands at record levels though many emerging markets have reduced their debt-to-GDP ratios while still facing crushing debt service payments and capital market crowding by advanced economies. – Reuters
