"The point of view of the international community was very clear in the G20 communiqué and in the discussions, private sector creditors should define a methodology to give comparable treatment to what was being done by official bilateral creditors," David Malpass said in an interview with Bloomberg, in which he added: "I believe they will be able to do that and move forward with the process.
In April, the G20 agreed to a temporary suspension of debt payments for more than 70 countries in financial difficulties to make the payments and, at the same time, deal with the increase in health spending to combat the covid-19 pandemic and deal with the suspension of economic activity.
In recent weeks, countries with high commercial debt have been reluctant to move towards a similar initiative to the G20, citing concerns about rating downgrades and, on the other hand, creditors have argued about fiduciary obligations to the ultimate private debt holders, which has delayed the process.
The International Finance Institute (IFI), which has led negotiations with the finance ministers of these countries, estimates that the poorest nations have about 140 billiondollars in outstanding debt this year.
The World Bank estimates that these nations could save 12 billion dollars through temporary suspensions, resources it has pointed out should be used to better deal with the public health emergency and economic crisis, not payments to richer nations.
According to World Bank figures, Angola is the country that will benefit the most from the plan and could save 3.4 billion dollars, around 28 percent of the total debt, Bloomberg said, noting that China agreed to a three-year moratorium on interest payments, totalling 21.7 billion dollars, according to Expansão.
China, by the way, is an inescapable partner in this agreement, since it is the creditor of about 60 percent of the debt that the poorest countries should pay this year.
"I am encouraged by China's level of commitment," Malpass told Bloomberg, pointing out that the willingness of the Chinese "brings long-term benefits, as the country will have relations with countries that have improved after the covid-19 pandemic.
Asked about the proposal of several organizations for the World Bank itself to forgive the debt, Malpass rejected the idea, arguing that it would damage the rating of the institution itself and thus prevent the release of more funds for countries that need it.
"Doing so brings with it the substantial risk of reducing the net positive flows that are available to the poorest countries," the World Bank president said, admitting that the idea was widely debated but that the conclusion was reached that "it doesn't make sense.
Malpass' statements come at the same time that the United Nations Economic Commission for Africa (UNECA) has been holding meetings with African finance ministers, following the public discussion that has taken place on how governments can honour commitments and at the same time invest in the spending needed to contain the covid-19 pandemic.
The assumption of the debt problem as a central issue for African governments was well reflected in the concern that the IMF and the World Bank devoted to the issue during the Annual Meetings held in April in Washington, where they made funds available and agreed on a moratorium on paying the debts of the most vulnerable countries to these institutions.
On 15 April, the G20, the group of the 20 most industrialised nations, also agreed to a suspension of 20 billion dollars in bilateral debt for the poorest countries, many of which are African, by the end of the year, challenging private creditors to join the initiative.
Private creditors already presented in June the terms of reference for countries to join the initiative for debt relief, which could be suspended but not forgiven, and accumulated interest, but several governments were reluctant to join the initiative for fear of downgrades in ratings, which would drive them away from the international markets needed to finance the reconstruction of economies after the pandemic.
Moody's is the only of the three largest financial rating agencies that considers adherence to bilateral debt relief for G20 countries to be sufficient reason to put that country's rating under review for a downgrade, which led UNECA Secretary General Vera Swonge to say that "no African country" will fail to pay debt to commercial and private creditors.
The UNECA, among other institutions, is designing a plan to swap countries' sovereign debt for new concessional bonds that could prevent the funds needed to fight covid-19 from being used to pay creditors.
Last week China said it was going to suspend debt payments to African countries, but it has not achieved the coverage either in terms of the value of the debt or in the countries included in this initiative.
