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Thursday, 16 April 2020

Paris Club agrees on debt relief plan for developing countries:

The world’s biggest payday loan club agree on debt relief plan for developing countries: Officials of the Paris Club group of creditor countries have agreed to suspend debt payments owed by developing countries to rich governments this year, French Finance Minister Bruno Le Maire told reporters following a video conference of G-7 finance ministers and central bank governors on Tuesday, according to CNBC. A more inclusive G-20 meeting was scheduled yesterday to finalize the anticipated move as this time around the Paris Club of creditors includes other G-20 countries besides the seven usual suspects. One potential obstacle is still-reluctant China, which recently emerged as Africa’s biggest creditor, sources familiar with the process told Reuters this week.

World Bank, IMF (and company) encouraged to join in: An additional USD 12 bn in debt owed by developing countries to the World Bank and other institutions is still being sorted out, Le Maire said on Tuesday, after encouraging multilateral lenders to join the moratorium. The WB and the IMF were the organizations that suggested the moratorium in the first place, but neither have yet committed to debt cancellations beyond this week’s USD 215 mn in relief grants to 25 vulnerable countries through the IMF’s catastrophe trust, CCRT.

This all comes as IMF figures show record portfolio outflows from EMs: Foreign portfolio flows to EMs have witnessed the “sharpest” reversal on record, with some USD 100 bn (roughly 0.4% of GDP) of outflows since 21 January, the IMF predicted in yet another gloomy report after saying earlier this week in its World Economic Outlook that we’re facing the most severe economic crisis since the Great Depression.

The currencies of commodity-producing EMs were also battered — including those of Brazil, Colombia, Mexico, Russia, and South Africa — and EM stock prices plummeted by nearly 20% since mid January, says the fund. This has had a huge effect on emerging and frontier markets’ ability to service debt as they usually rely on foreign inflows and maintaining the strength of their local currencies, making the moratorium all the more necessary.

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