Durrant Pate/Contributor

The G20 debt relief framework, which was crafted four years ago, has proven to be a dismal failure with a senior World Bank official calling for a revamping of the debt relief scheme.

Citing that the framework has failed to provide any new money to the world’s poorest countries since it was set up in 2020 by the G20 group of leading developed and developing countries, World Bank chief economist Indermit Gill has declared that the mechanism is failing to produce results. As such, he is contending that it now requires a major rethink.

Gill argued that after four years the G20’s common framework – designed to speed up and simplify debt restructuring – it has not provided a single dollar in new money. It has been established that more than half the 75 countries deemed poor enough to be eligible for concessional finance from the World Bank are either in distress or close to it.

Entrenching poverty

Speaking in an interview with The Guardian at the bank’s spring meetings in Washington, Gill was adamant that cripplingly high repayments is entrenching poverty.

“We have to recognise the problems. The common framework won’t deliver what leaders say it will. They are saying this horse is not dead yet, so let’s just keep whipping it,” Gill posited.

He contended that a key weakness of the common framework is that private bondholders – an increasingly important group of creditors – are only brought in at the end of debt negotiations.

Gill was scathing in his criticism of the flagship initiative created in 2020 by the G20 group of leading developed and developing countries arguing, “The common framework is not working. If the money from debt relief was coming in dribs and drabs, I would say OK, but there hasn’t been a single dollar of debt relief from the common framework.”

Handful of countries

So far, only a handful of countries including Chad, Ethiopia, Ghana and Zambia, have applied for debt relief through the common framework. Gill cited another weakness of the framework: the fact that its secretariat is the Paris Club, a group of 20-plus creditor countries mostly in the developed West.

Failure to come up with a workable debt framework is holding back development by years, according to the World Bank chief economist. “Countries are deterred from going through the common framework because they won’t get access to financial markets and they won’t get debt relief,” Gill stated.

Although the International Monetary Fund declared last week that the global economy is on course for a “soft landing”, Gill is not accepting the argument that the world had “dodged a bullet”.

Gill identified the problems of heavy indebtedness, which he assessed would not go away, and expressed scepticism that burdens would ease as interest rates came down in the US. He said debt payments are forcing low-income countries to cut back on spending on health, education and investment.