The European Union will call on financial leaders of the world’s 20 biggest economies this week to keep pumping money into the global economy as long as is needed for it to recover from the Covid-19 pandemic, a document prepared for the meeting showed.
Finance ministers and central bank governors of the world’s top 20 economies, called the G20, will hold a video-conference on Friday and the global response to the unprecedented havoc wreaked by the coronavirus on the economy will top the agenda, reports Reuters.
“Fiscal policies should remain supportive as long as necessary, and not be prematurely withdrawn,” the terms-of-reference for all European delegations to the meeting said.
“The fiscal response going forward should continue to be carefully calibrated and regularly reviewed, in light of the uncertainty associated with the pandemic ... and the need to avoid policy cliff-edge effects,” said the document, agreed by all EU governments.
The pandemic, which has ravaged the world economy since February 2020, is affecting poor countries with relatively large debts more than others, because they don’t have the possibility to stimulate their recoveries through much new debt.
The EU has said it would therefore support an extension of a G20 initiative from last year suspending debt servicing for poor countries by a further six months. But it also left the door ajar to do more, if needed.
“The EU is open to discuss options to reduce the financial pressure on low income countries should they face financial pressures and is looking forward to the analysis by the IMF and World Bank of the external financing needs in low income developing countries in the coming years,” the document said.
Officials said that no-one in the EU has proposed a discussion on writing off some debt for poor countries, but that there was recognition that the problem may run deeper than just suspending their debt-servicing payments.
But for anything more than that to become reality for the Paris Club of government creditors, low-income countries would have to be transparent about their debt obligations to China, which is a major lender to many African states.
“If we don’t know whether China participates in any debt relief, we can’t do debt relief because we may end up subsidising China, not helping low-income countries,” one EU official said.
The terms of reference document reiterated the EU was ready to boost the IMF’s resources, but did not name any figures.
“We are willing to support a new general allocation of Special Drawing Rights in 2021 on the basis of the IMF Articles of Agreement and of a detailed and convincing IMF proposal,” it said.
