The G-20 introduced the Debt Service Standstill Initiative (DSSI) early in 2020 to suspend sovereign debt repayments of least developed countries (LDCs), so they can redirect their resources to fight COVID-19. The suspension period, originally set to end on December 31, 2020, is now extended to December 2021. There are 73 countries eligible for a temporary suspension of debt-service payments owed to their official bilateral creditors. The G-20 has also called on private creditors to participate in the initiative on comparable terms.
Of the 38 countries in sub-Saharan Africa eligible for relief under the G-20’s DSSI, 31 have participated to some degree. The high participation reflects the fiscal challenges faced by the countries in the fight against the pandemic and its impact on economies. Some eligible countries, however, have been hesitant to defer payments on all eligible debt because of concerns about sovereign rating downgrades. For instance, Ghana, Nigeria, Liberia, and Benin are among countries not participating in DSSI.
All in all, DSSI implementation remains below expectations. As of the summer of 2020, the DSSI helped mobilize only USD4 billion, significantly below the target of USD12 billion for all participating countries. Furthermore, the impact of the debt freeze initiative has been rather limited due to the absence of creditor participation, including that of the private sector.
IMF estimates that Africa needs an additional USD345 billion through 2023. The G-20 and international financial arms are expected to introduce additional packages. EBR
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9th Year • Apr 16 – May 15 2021 • No. 97