Union Minister for Finance & Corporate Affairs Smt. Nirmala Sitharaman participated in the G20 Finance Ministers and Central Bank Governors (FMCBG) meeting under the Saudi Arabian Presidency here through video conferencing. Ministers and Governors of G20 countries had gathered to discuss the current global economic outlook and G20’s response to the COVID-19 pandemic, along with other G20 Finance Track priorities for the year 2020.

In the first session, the Finance Minister spoke on updates to the G20 Action Plan in response to COVID-19 which was endorsed by the G20 Finance Ministers and Central Bank Governors on April 15th 2020. Smt. Sitharaman emphasised that the updated commitments in the G20 Action Plan have to be kept relevant in the current policy context for the action points to remain effective as a policy response to COVID-19.

Explaining the core guiding principles for the updation of the G20 Action Plan commitments, Smt. Sitharaman highlighted the need to balance the health and economic objectives in the recovery plans. Adding to this, the Finance Minister also spoke about the need to consider heterogeneity of policy responses among member countries, international spillovers from domestic policy actions and reforms required in the global regulatory regimes particularly with respect to the procyclicality of credit rating downgrades.

One of the key outcomes of the G20 Action Plan has been the Debt Service Suspension Initiative (DSSI) which provides time bound suspension of debt service payments for the low income debtor countries that request forbearance.  The initiative was initially in force till end of 2020. During this meeting, in light of the continued liquidity pressures, the G20 Finance Ministers and Central Bank Governors agreed to extend the DSSI by 6 months, and to examine by the time of the 2021 IMF/WBG Spring Meetings if the economic and financial situation requires a further extension of the DSSI.

Talking about addressing the debt vulnerabilities of low income countries, Smt. Sitharaman observed that in a longer term, a more structural treatment of debt is required. She emphasised that this process should primarily be guided by the objective of helping such countries overcome the fiscal stress caused by the pandemic. The Finance Minister underlined that it would be important to take into consideration the circumstances and concerns of both creditors and debtors and that in the process of debt restructuring, care must be taken to not saddle the debtor countries with overly burdensome conditionalities.

Debt suspension initiative extended and reviewed, with emphasis on balanced recovery and structural debt treatment to protect vulnerable countries. The G20 updated the G20 Action Plan to align COVID 19 response commitments with current health and economic priorities, emphasising policy balance, heterogeneity of national responses, international spillovers, and limits to procyclical credit rating effects. The meeting extended the Debt Service Suspension Initiative (DSSI) for eligible low income countries and agreed to review the need for further extension by the 2021 IMF/WBG Spring Meetings, while calling for structural debt treatment that considers creditor and debtor concerns and avoids unduly burdensome conditionalities.