IIF outlines debt relief for poor countries
May 29, 2020 |
Private creditors could suspend payments through the end of the year to free up funds for the coronavirus crisis
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The Institute of International Finance (IIF), a US-based trade association for financial institutions, has heeded a call from the G20 and outlined ways for private creditors to offer debt relief to poor countries during the coronavirus pandemic.
Private-sector lenders that voluntarily choose to participate in the program can suspend debt payments due from May 1 until the end of year, the IIF said in a document on Thursday.
The terms of private creditor participation will be in line with the terms of official bilateral creditors. Unpaid interest will be capitalized and will accrue at an agreed-upon rate. The repayment period for the deferred amounts will cover three years from 2022, following a one-year grace period, according to the IIF.
"Throughout this entire process, the IIF has been adamant that creditors of every type and size have a role to play in making sure the world's most vulnerable countries have the liquidity needed to combat the COVID-19 pandemic," IIF CEO Tim Adams said.
"These terms of reference represent the tireless efforts of the private sector to do the right thing," he added.
G20 members announced in April that they would temporarily suspend debt payments for poor countries requesting forbearance in agreement with the Paris Club and called for private creditors to participate in a comparable initiative. They specifically asked the IIF to coordinate talks among private creditors to develop the terms for poor countries to delay debt payments.
The IIF said it talked more than 100 private-sector lenders with more than $45 trillion in assets to draft the terms of reference along with the International Monetary Fund (IMF), World Bank, Paris Club, United Nations Economic Commission for Africa and more than a dozen finance and development ministers.