Daily Times

G20 countries didn’t extend their program of debt relief to poor countries by one year, as many from the third world were demanding, but they did extend it by another six months which ought to be very welcome indeed. What is more, they have committed to examining the situation once more around mid-2021, by the time of the IMF/WB Spring Meetings, and see if yet another extension is needed. So far more than 70 counties have taken part in this initiative, Pakistan among them, and proved that it has significantly facilitated higher pandemic-related spending. In actual sum Pakistan’s external debt service payments to the tune of $1.8 billion were rescheduled since they fell till the end of December. And though it might not be a very large sum, it did give the government the precious breathing space it needed to divert whatever little money it did have towards programs that were meant to keep the economy functioning despite the impact of the lockdown.

Yet now that another wave of the coronavirus is fast becoming a reality in most parts of the world, much of which struggles to balance its budget in the best of times, countries with pressing debt payments will require more help with time, not less. That is so because they have already exhausted their reserves in putting together the relief and stimulus packages that were so urgently required. The biggest concern going into the G20 meetings over the last few days was the fact that many of their own economies are experiencing the kind of financial trauma that they have not seen in at least a century. That they have still favoured the path of an extension in the temporary debt servicing must be appreciated.

There is no denying that the pandemic would have knocked out some of the poorer economies if it hadn’t been for initiatives like the G20 debt moratorium. The only other option that countries desperate for finances had at that point in time was borrowing more at exorbitant rates from financial institutions, which would only have worsened the overall debt burden and their vulnerability. Hopefully things will be better in six months and another round will not be needed. But if it is not so, which is the most likely scenario, then the advanced world will have to continue to lend a hand so that everybody can come out of this ordeal in one piece. *