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China extends biggest debt relief to poor countries among G20 states

China extends biggest debt relief to poor countries among G20 states
The world’s largest lender, China, says it has granted debt relief worth a combined $2.1 billion to developing economies hit hard by the coronavirus crisis.

This is the highest deferral amount offered among the members of the G20, a group of the world's largest economies, Chinese Finance Minister Liu Kun announced on Friday. 

Debt payments from developing economies worth $1.353 billion were suspended by the country’s aid agency, the China International Development Cooperation Agency, and the Export-Import Bank of China, according to the official. Almost two dozen countries are set to benefit from the measure. 

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Additionally, the China Development Bank (CDB), which serves as a commercial creditor, deferred $748 million in debt of the poorest counties by the end of September. The move is part of the Debt Service Suspension Initiative for Poorest Countries (DSSI), agreed by the G20 in April, shortly after Covid-19 started wreaking havoc globally.  

“China will stay in close communication and coordination with other parties within the G20 over the issue of debt vulnerabilities in the poorest countries, and we will continue to participate, in an active manner, in the multilateral debt coordination process” Liu said.

The Chinese finance minister added that Beijing will boost support for developing countries, including providing $2 billion in international assistance over two years. It also pledged to take part in a multilateral debt relief facility, if the World Bank sets it up, and prioritize Covid-19 vaccine supply to poor economies once it becomes available.

The DSSI offers a temporary suspension of “official sector” or government-to-government debt payments to some 73 low- and lower middle-income countries, many of which are in Africa, until at least mid-2021. According to G20 creditor data as of last month, the requests from countries to benefit from the plan will amount to an estimated $5 billion of 2020 debt service to be deferred. Around 60 percent of the eligible countries have requested debt relief so far, and more are expected to apply. 

The debt stock of DSSI-eligible countries to biggest global creditors, most of which are G20 states, hit $178 billion last year, according to the World Bank. China has emerged as the largest lender, with its share of the combined debt owed to G20 countries rising from 45 percent in 2013 to 63 percent in 2019.

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