The G20 is taking a lot of flak lately. It’s a global club of the world’s richest and most significant economies, but its reputation has diminished since its heyday when it successfully managed the aftermath of the 2008 global financial crisis.
This, the G20 leaders declared, would release considerable funds for countries to fight Covid-19, both directly in terms of health measures and to ameliorate the economic fallout. But will it? If African governments could divert US$5.275-billion from servicing debt this year, that would certainly help them fight Covid-19 and its repercussions. But the reality is rather fuzzier. So far only the Paris Club creditors are fully committed to the DSSI. And as Brookings Institution Senior Fellow David Dollar tellsSo it’s important to get non-Paris Club creditors on board, particularly China, which holds 17% of African debt; and private sector lenders, who account for 31% of it, Dollar says.
And Sidiropoulos says Beijing seems to be struggling to collate all the foreign loans from its various state banks. China also prefers to renegotiate loans bilaterally, not multilaterally. All this makes it impossible to predict how much money China might release. Some DSSI-eligible countries are reluctant to ask their private creditors to join the DSSI because credit rating agencies have warned that they may downgrade them if they do. Moody’s for example has already placed Ethiopia and Pakistan on negative watch for this reason, the World Bank says. Meanwhile the World Bank itself and the International Monetary Fund still appear to be mulling participation, but also seem concerned that they’ll lose their triple-A credit ratings if they do.
The ONE Campaign of development activists has called for the DSSI to be extended beyond 2020 and to include all African countries, not just the poorest. Its Africa Executive Director Edwin Ikhuoria says on its website: ‘Many that are not included – South Africa, Egypt and others – face tremendous economic pressure as they fight the virus.’
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