COVID Crisis: G20 Defers Action on Aid, Tax and Debt Cancellation

G20 finance ministers agreed to extend debt payment relief for the 73 poorest countries and, in principle, to have a common framework to cancel debts. The G20 Finance Ministers and Central Bank Governors met on global COVID-19 response plans ahead of the Annual IMF and World Bank Meetings.

"Debt payment relief for the poorest countries is good news, but it's a short term solution,” said Eric LeCompte the Executive Director of Jubilee USA Network and a United Nations finance expert. "We're disappointed not to have a stronger agreement on a permanent debt reduction process, yet, but it's hopeful that the G20 is holding a special meeting on this process in the coming weeks.”

G20 finance ministers will hold a special meeting before G20 presidents and prime ministers meet in November, on a country debt reduction plan or the “Common Framework for Debt Treatments beyond DSSI.” The announcement came as the International Monetary Fund forecast a contraction of 4.4 % for this year in the global economy and a recovery that will be long, uneven and prone to setbacks.

"The only way for some developing countries to have the resources they need to recover from the coronavirus crisis is to have a process that permanently reduces their debts,” stated LeCompte. “Given that some of the greatest increases in poverty and job loss are in these developing countries, the G20 can't afford to wait any longer on moving forward a plan.”

The G20 expressed disappointment at the absence of private creditor participation in the debt suspension initiative.

"The G20 should be doing more to press the private sector on debt relief. It seems since April, the position of the G20 has weakened on private sector participation in debt relief,” noted LeCompte. 

International tax cooperation was also a focus of the G20. The countries had vowed to agree this year to a global plan for taxing digital revenues and ensuring multinationals pay tax, but they now pushed back that timeline to mid-2021.

“Part of the reason we are in this mess, is because countries aren't raising enough revenues. Now revenues are plummeting in many countries because of the pandemic and the G20 must make more progress on global tax solutions,” explained LeCompte. "An immediate way to combat the coronavirus and support developing countries in crisis is to access trillions of dollars in global reserve funds or the Special Drawing Rights. Unfortunately the G20 made little progress on authorizing what could be a lifesaving measure for countries in crisis."

Read Jubilee USA's press release on the IMF's World Economic Outlook and Global Financial Stability reports here.