The G20 plays a critical role in supporting countries facing debt sustainability challenges. This was demonstrated through the historic Debt Service Suspension Initiative (DSSI), launched in 2020, which provided much-needed fiscal space for the poorest countries to mitigate the severe impacts of the Covid-19 pandemic by prioritising health, social, and economic responses over debt repayments. In light of the need for a more structured mechanism, G20 Leaders in the Riyadh Declaration have also endorsed the Common Framework for Debt Treatments beyond the DSSI, which is also agreed on by the Paris Club, to offer a comprehensive and coordinated approach to debt restructuring.

While the risk of a systemic debt crisis appears to be broadly contained, many vulnerable low and middle- income countries face high financing costs, large external refinancing needs, and a significant outflow of private capital. These debt vulnerabilities, along with other factors, can constrain their fiscal space, their ability to address poverty and inequality, and their capacity to invest in growth and development. The situation is particularly challenging for many low-income countries, especially those in Africa. We note with concern that interest payments on total external public debt have increased significantly and have more than doubled over the past decade for low-income countries.

When debt is prudently managed, it is an important tool for financing sustainable development investments. Borrowing countries can take significant steps to borrow responsibly while pursuing sound public debt management, relying on strong fiscal frameworks, and implementing structural reforms to foster strong economic growth. Several borrowing countries also require further international assistance to support their efforts to strengthen debt sustainability and nationally enhance domestic resource mobilisation.

Report by G20 South Africa