IIF and Paris Club to collaborate on debt relief, but S&P warns on default
Private creditors and the Paris Club have agreed to collaborate on a debt standstill for low-income countries, but the process must be handled with care to avoid being more punitive than helpful.
Private and official creditors to the world’s poorest countries agreed to collaborate on a debt standstill beginning on May 1. Agreeing to collaborate is only the first step, though. Now they must work out how to implement the standstill.
The Debt Service Suspension Initiative (DSSI) applies to 73 countries – the majority in Africa. The 77 lowest income countries have outstanding debt payments amounting to $140 billion, though Eritrea, Sudan, Syria and Zimbabwe are ineligible as they are currently in arrears with either the IMF or the World Bank.
Little detail was offered on how the process would work, but the Institute of International Finance (IIF) and Paris Club proposed that it should be granted at the specific request of borrowing countries. Participation for private sector creditors will be voluntary, the IIF says.
“Everyone would like to help, there is a lot of willingness but [the IIF] is trying to figure out how this can be done,” says a source with knowledge of the conversations.