July 15, 2020 / 4:25 PM / in 25 days

No formal requests yet to private sector under G20 debt payment freeze: IIF

WASHINGTON (Reuters) - Private creditors have not received any formal requests from countries for debt service suspension under the G20 initiative, the Institute for International Finance (IIF) said on Wednesday, ahead of Saturday’s meeting of Group of 20 finance officials.

Some of the 73 poorest countries eligible for the G20 Debt Service Suspension Initiative (DSSI) and others that were not have had made informal requests about deferring interest on bonds, the group of private bank and financial institutions said, citing meetings with dozens of commercial creditors.

Some private creditors were looking at deferring debt payments due from borrowers, but others were reticent to do so, given concerns about a “lack of data transparency especially on debt and debt service projections” in implementation of the DSSI.

World Bank President David Malpass last week expressed similar concerns, and emphasized the need for participation by all official bilateral creditors, including state-owned banks and enterprises that have government guarantees.

Top international officials and civil society groups have criticized the lack of participation by the private sector in the G20 initiative, which is aimed at allowing the poorest countries to focus on fighting the COVID-19 pandemic and its economic fallout, instead of servicing their debts.

IIF has argued for a case-by-case approach, but has sought to ease the process for poorest countries to ask private creditors to freeze service payments by issuing terms of reference and other legal tools.

Private sector debt now accounts for a larger portion of overall debt stocks, but data is limited and partial due to non-disclosure agreements often demanded by Chinese creditors, a large source of credit for developing countries, experts say.

IIF also noted that market access was improving for most of the poorest countries after large capital outflows from emerging markets and developing economies, but the overall cost of borrowing remained relatively high.

Reporting by Andrea Shalal; Editing by Tom Brown

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