Debt-Relief Initiative to Benefit Angola, Cabo Verde, Mozambique and São Tomé

 

The international Debt-Relief Initiative (DSSI), which is joined by China, will benefit Angola, Cabo Verde, Mozambique and São Tomé and Príncipe, according to the Paris Club.

 

Until this week, 38 eligible countries have requested to benefit from the Debt Service Suspension Initiative (DSSI) by the Paris Club.

 

Of these requests, 36 have already signed a Memorandum of Understanding with the Paris Club creditors to implement the DSSI, including Angola, Cabo Verde, Mozambique and São Tomé and Príncipe.

 

“For these 36 countries, the total deferred amounts agreed by Paris Club creditors thanks to the DSSI – also including the deferment of arrears that pre-existed the implementation of the DSSI – reaches USD 2.5 billion”, the Club said in a statement.

 

For Cabo Verde and São Tomé and Príncipe, Portugal, which is not member of the Paris Club, signed jointly with the Paris Club creditors both Memoranda of Understanding implementing the DSSI, it added.

 

According to the data released, total deferred amounts are USD 108 million for Angola, USD 22 million for Cabo Verde USD 144 million for Mozambique and USD 5 million for São Tomé and Príncipe.

 

Paris Club creditors vow to continue to closely coordinate with non-Paris Club G20 members and other stakeholders in the ongoing implementation of the DSSI and its extension, so as to provide maximum support to beneficiary countries.

 

After having agreed to extend the DSSI by six months until 30 June 2021, Paris Club members will examine by the time of the 2021 IMF/WBG Spring Meetings if the economic and financial situation requires to extend further the DSSI by another six months, the statement adds.

 

Paris Club members also endorsed a “Common Framework for Debt Treatments beyond the DSSI” and welcomed a decision taken by the extraordinary G20 Finance Ministers and Central Bank Governors’ Meeting to also endorse this Common Framework.

 

“Recognizing that efficiently addressing ongoing debt vulnerabilities will require a strong creditors’ coordination, the Common Framework sets out a multilateral approach to facilitate debt treatments for DSSI-eligible countries by Paris Club and G20 creditors in a timely, coordinated and orderly manner, while ensuring a broad participation among creditors, including the private sector through the comparability of treatment principle”, the Club says.

 

“This Framework represents a major breakthrough in the international financial architecture and will strengthen the coordination between Paris Club creditors and other G20 creditors at a time when debt vulnerabilities are high, particularly in low-income countries”, it adds.

 

China has suspended USD 2.1 billion of debt service payments from 23 indebted poor countries, including Angola, to assist the fight against the coronavirus pandemic, in line with the G20.

 

The G20 adopted the DSSI in April, offering a temporary suspension of government-to-government debt repayments to 73 developing countries to help them weather the impact of the coronavirus pandemic.

 

Many countries are unable to repay their debts amid the coronavirus pandemic and the economic crisis it has provoked, with Zambia and Angola considered among those in highest financial distress.

 

According to the G20, as of 13 November 2020, 46 countries have requested to benefit from the DSSI, amounting to an estimated USD 5.7 billion of 2020 debt service deferral.

 

The IMF recently announced that Angola will receive USD 6.2bn in debt service relief over the next three years (to 2023) as a result of agreements with three of its major creditors – most likely Chinese banks, although this has not been officially confirmed.

 

On the eve of November’s G20 summit, Chinese Finance Minister Liu Kun said that the China International Development Cooperation Agency and official bilateral lender Export-Import Bank of China had suspended debt service payments worth USD 1.353 billion as part of the DSSI.

 

Liu said China Development Bank (CDB) – which Beijing classes as a commercial creditor – had “on a voluntary basis and according to market principles, actively responded to the DSSI”.

 

By the end of September, CDB had signed agreements with DSSI beneficiaries involving USD 748 million.

 

Exim Bank of China said it had suspended the payment of all interest and principal on sovereign loans amounting to USD 110 million due between May 1 and December 31, 2020. And in late October, Lusaka reached a deal with CDB to defer interest and principal repayments for six months until April 2021.

 

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