ODI-借还是暂停？新冠流行危机中多边银行融资的影响最大化分析（英文）-2020.7-42页_336kb

Summary of "Lend or suspend?" by Chris Humphrey and Shakira Mustapha

Core Content

This paper, published in July 2020 by the Overseas Development Institute (ODI), analyzes the role of multilateral development banks (MDBs) in responding to the economic and social impacts of the Covid-19 pandemic, particularly on lower-income countries (LICs). It evaluates the Debt Service Suspension Initiative (DSSI) launched by the G20 in April 2020 and argues that MDBs should not participate in the DSSI due to its limited benefits and potential long-term negative consequences.

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Main Points

1. Need for Financial Assistance

• The global pandemic has caused a severe economic downturn, leading to significant socioeconomic damage.
• Lower-income countries require counter-cyclical financial assistance to mitigate this damage and support recovery.
• The IMF's capacity to provide aid is limited due to fixed lending quotas, and donor countries are also constrained by their own economic shocks and fiscal restrictions.

2. DSSI Overview

• The DSSI was introduced by the G20 to temporarily suspend debt repayments for 77 lower-income countries.
• It aims to free up public resources for pandemic response and healthcare, but it does not cancel debt.
• The initiative is temporary, with repayments resuming in 2022–2024.
• The DSSI does not include private or multilateral creditors, which limits its scope and effectiveness.

3. Debt Profile of DSSI-Eligible Countries

• 68 countries are eligible for the DSSI, with varying levels of debt risk:

  • 12 at low risk
  • 21 at moderate risk
  • 26 at high risk
  • 6 in debt distress

• Multilateral debt accounts for about 34% of the total external debt stock in 2018, down from 46% in 2010.

• Private sector debt is growing, accounting for 13% of the total debt stock but 36% of total debt service payments in 2018.

• Official bilateral debt accounts for 39% of debt service payments, with China being a major bilateral creditor.

4. Debt Sustainability Concerns

• Many DSSI-eligible countries were already vulnerable to debt distress.
• The DSSI is not sufficient to address the full scale of the crisis, as it only provides temporary relief.
• The DSAs (Debt Sustainability Analyses) used to assess eligibility are overly optimistic, assuming a quick economic recovery and continued access to capital markets.
• For countries without market access, the DSSIs assume concessional financing will fill gaps, but this is not guaranteed.

5. MDBs and the DSSI

• MDBs should not participate in the DSSI, as it would reduce their lending capacity and increase borrowing costs.
• Participation could lead to rating downgrades and long-term financial risks for developing countries.
• The preferred creditor treatment (PCT) is at risk of being undermined by DSSI participation.
• Instead, MDBs should increase concessional financing and supplement it with donor resources and non-concessional lending.

6. Options for MDBs

• MDBs can provide debt relief without triggering arrears by using mechanisms like:
  • Rescheduling of debt
  • Lending to public sector entities to support essential services
  • Increased budget support and accelerated loan disbursement
• These options allow for greater flexibility and debt sustainability compared to the DSSI.

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Key Recommendations

1. MDBs should avoid participating in the DSSI, as it is not in the best interest of developing countries.
2. Accelerate concessional lending and expand non-concessional financing through bond issues and donor support.
3. Supplement DSSI with additional debt relief measures, including rescheduling and restructuring, to ensure long-term debt sustainability.
4. Improve transparency in public debt data, especially regarding state-owned enterprises (SOEs) and collateralized debt.
5. Address the limitations of the DSSI, such as exclusion of private creditors and uncertainty in implementation.

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Conclusion

The DSSI provides a temporary reprieve for some lower-income countries, but it is insufficient to address the full scale of the crisis. MDBs have a critical role to play in supporting LICs through concessional financing, accelerated lending, and debt restructuring. Participation in the DSSI is not recommended due to its short-term benefits and long-term risks, including reduced lending capacity and negative impacts on credit ratings. A more comprehensive and sustainable approach is needed to ensure that developing countries can recover effectively from the pandemic's economic fallout.