The G20 is committed to stepping up aid to poor countries

The G20 is committed to stepping up aid to poor countries
The G20 is committed to stepping up aid to poor countries
The big financiers of the G20 countries announced, Wednesday, April 7, a new six-month extension, until the end of 2021, of the moratorium on the debt of the poorest countries, hard hit by the Covid-19 pandemic.

“We have decided to extend the initiative to suspend the debt service of the most vulnerable countries until the end of 2021”, declared the Italian Minister of Economy, Daniele Franco, during a videoconference meeting chaired by Italy, adding that it is the “last” extension.

Increase the IMF’s lending capacity

The G20 also supported the initiative of the International Monetary Fund (IMF) to increase aid to the most vulnerable countries, in the form of a new issue of special drawing rights (SDRs) in the amount of of $ 650 billion. This issue, the first since the financial crisis of 2009, will increase the IMF’s lending capacity.

The moratorium on the payment of interest on the debt of the poorest countries was decided by the G20 last April, in the midst of the pandemic, and extended in October until June 30, 2021.

The President of the World Bank, David Malpass, welcomed this new extension, while calling on the G20 countries to show “greater transparency”.

“I urge all G20 countries to publish the terms of their financing contracts, including rescheduling, and to support the World Bank’s efforts to match borrowers ‘debt data with creditors’ data,” he said. he said. The impact of this initiative was quite limited, as private creditors did not participate.

To date, 46 countries, out of the 73 eligible, have requested and obtained a deferral of the payment of interest, for an amount of 5.7 billion dollars.

In November, a new step was taken with the adoption by the G20 finance ministers of a “common framework” to reduce the debt burden, an initiative they pledged to implement on Wednesday. “open and transparent” way.

Global minimum corporate tax rate

On the American proposal to relaunch the work of a global minimum tax on companies, the G20 countries have not gone too far. They contented themselves with declaring that they remained “committed to finding a comprehensive and consensual solution (…) by mid-2021”. Negotiations on this reform, carried out under the aegis of the Organization for Economic Co-operation and Development (OECD), had failed in the fall due to the American blockage; the change in attitude of the new administration fuels the hope of an agreement in the summer. The thresholds mentioned for such a minimum rate range from 12.5% ​​to 21%.

The reform of this international tax system concerns two aspects: the establishment of a world minimum rate and a system aimed at modulating corporate tax according to the profits made in each country, regardless of their tax establishment.

This last aspect particularly concerns the Internet giants, many of which practice tax optimization, establishing their headquarters where the tax rate is lowest.

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