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Highlights
- As the pandemic began, the G20 nations took the G20 Debt Service Suspension Initiative (DSSI).
- As the DSSI ends at the end of 2021, the underdeveloped countries will be pushed towards greater vulnerabilities.
- If emerging countries don’t come out of the shackles of the pandemic, the world as a whole can’t win the battle against the COVID-19 pandemic.
Countries across the world work in an interconnected framework. In the present globalised world, trade, policies, and human rights are interdependent across countries. In the current system, the rich nations (G20s) have the financial, political and public power of changing the course of actions globally.
The interdependency framework
G20 nations lend money to developing countries to help them come out of poverty, hunger and stay upright. For example, in the pandemic, the world powers collectively lent funds to the underdeveloped nations so they could move ahead with vaccination and other measures.
Omicron and the mountain of rising interest rates
However, as the world economy entered the revival period, prices increased. Due to the high inflation rate, central banks worldwide decided to increase the rate of interest. Now, as the interest rate rises, the developing countries will crush deeper beneath the heap of debts and higher interest payments.
According to the IMF, around 60% of underdeveloped and developing nations are suffering or may suffer due to high debt stress. And, to make matters worse, the Omicron variant has entered more than 25 countries already, which indicates that global recovery may face a feeble path in the coming months, as per OECD.
Imge source: Pixabay
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IMF urges G20 nations to step up the framework for debt treatments
As the pandemic began, the G20 nations took the G20 Debt Service Suspension Initiative (DSSI); however, it is reaching an end. Thus, the IMF is insisting the G20 governments continue and accelerate their credits to emerging nations; otherwise, several countries can face economic collapse.
Additionally, the IMF suggested that economically stable countries should put more effort to build a better framework beyond the DSSI to help the developing countries come out of debt vulnerabilities.
Glancing at the lending performance
The G20 nations dedicated themselves to supporting low-income countries by lending USD 100 billion of their special drawing rights (SDRs) to magnify this impact. However, the lending framework has been slow, according to the IMF.
The motif of the DSSI is to project the emerging nations from insolvency; however, as the DSSI ends at the end of 2021, the underdeveloped countries will be pushed towards greater vulnerabilities.
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The need of the hour
Looking at the inflation rate and mourning interest rates along with the spread of the new variant, it looks like 2022 will be a challenging year for most countries, especially the non-advanced nations.
Thus, the need of the hour is for the G20 nations to continue with their lending along with IMF lending. However, more clarity for the common debt framework is needed. The IMF has recommended that the G20 nations form a committee to decide upon the new guidelines for the common framework and expand their lending horizons so that all the suffering countries can be saved.
Bottom line
At this point, the world powers shouldn’t stop their lending. It is undoubtedly clear if emerging countries don’t come out of the shackles of the pandemic, the world as a whole can’t win the battle against the COVID-19 pandemic. Thus, to overcome vaccine inequalities and other primary problems, it is significant for the world powers to frame more reliable frameworks and act urgently to pull out the developing nations from the pit of insolvency.
