The UK Government is deeply concerned about the impacts of the COVID-19 pandemic on the public finances of low-income developing countries. In this time of crisis, it is vital that creditors work together to ensure that servicing debts does not prevent countries protecting their citizens and economies.
The UK, alongside the G20 and the Paris Club of official creditors, has committed to a temporary suspension of debt service repayments from the poorest countries. This official sector effort could provide up to $12 billion of additional fiscal space until the end of the year, allowing countries to redirect finances towards mitigating the health and economic impacts of COVID-19.
In the future, some countries, especially those entering the crisis with significant debt vulnerabilities may require debt relief. If debts do require restructuring or reduction, this will need to be done evenly amongst creditors, including non-Paris Club G20 creditors and the private sector. The G20 initiative provides more time to assess countries’ debt positions and explore possible solutions with other stakeholders whilst, importantly, freeing up resources to allow countries to respond to the crisis.