(Bloomberg) --

The world’s wealthiest economies may need to pardon the debts of some low-income nations and help rework the obligations of larger developing countries if the coronavirus pandemic ravages their finances, according to the chair of the Paris Club.

“Some countries may need more than just a moratorium for six months or one year. We may need deeper debt alleviation,” said Odile Renaud-Basso, the chair of the Paris Club, created in 1956 to restructure Argentina’s debt with creditors. “If you want to go beyond, either you go for debt rescheduling with longer terms, or debt cancellation as it has been done in the past.”

The Paris Club is confident China will take part in the global drive to pause debt payments for poor countries that urgently need funds to battle the pandemic. Africa, which is home to two-thirds of the world’s poor, owes almost $150 billion, or about 20% of all government external debt to China, according to the relief group Jubilee Debt Campaign.

However, middle-income emerging economies hit hard by the pandemic may also need help to rework their debts if they are able to show they are struggling to cover financing gaps, Renaud-Basso said.

“Bilateral creditors could be ready to do something, but not in the context of the initiative, it will be more of a case-by-case treatment,” said Renaud-Basso, who is also the director-general of the French Treasury.

Key Developments:

  • Zambia’s request for emergency coronavirus funding from the International Monetary Fund may be scuppered because of the southern African nation’s growing debt burden.
  • Nigeria’s House of Representatives authorized a parliamentary committee to seek the review or cancellation of some Chinese loans to Africa’s largest economy, according to the Vanguard newspaper.
  • African finance ministers have started talks with private creditors to find a way to temporarily suspend debt payments without triggering defaults.

Earlier:

  • The International Monetary Fund raised Kenya’s risk of debt distress to high from moderate due to the impact of the Covid-19 shock, even as it said the country’s overall debt remains sustainable.
  • More governments will probably default on debt payments in 2020 as the coronavirus pandemic and collapse in oil prices exacerbate credit weaknesses, Fitch Ratings said.
  • South African President Cyril Ramaphosa said African countries need a two-year debt standstill to provide governments with the fiscal space to fight the coronavirus pandemic.
  • The IMF approved $2.77 billion in emergency funding for Egypt.

Read More:

  • Just 73 Countries Are Eligible for the G-20’s Debt Pause: Map
  • Why There’s a Looming Debt Crisis in Emerging Markets: QuickTake
  • Investors Spell Out Hurdles to Achieving Global Debt Relief Plan
  • Halt Credit-Rating Moves for Virus, S. Africa Tax Head Says
  • G-20 Backs Temporary Debt Relief for World’s Poorest Nations

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