ROME: Italy, this year’s president of the Group of 20 rich and emerging nations, will push its members to extend debt relief to poor countries struggling to deal with the coronavirus pandemic, a top official from Rome’s G20 financial team told Reuters.
Italy was also confident the Biden presidency would herald a more cooperative stance from the United States on international financial cooperation, particularly in areas such as climate change and helping the poorest states.
“We must grant fiscal space to the low income countries in greatest difficulty,” said Gelsomina Vigliotti, Italy’s Treasury director general for International Financial Relations, setting out the country’s priorities for its presidency in an interview. Vigliotti said Italy, which took the helm of the G20 in December, would push to extend until end-year the Debt Service Suspension Initiative (DSSI) freezing bilateral debt-service payments for more than 40 countries.
Restrictions enacted to combat the pandemic have hit poor countries especially hard and threaten to push millions into extreme poverty. Many countries that already faced crushing debt levels before the crisis have to restructure their loans or face default.
The DSSI, promoted by the International Monetary Fund and the World Bank and agreed by the G20, was introduced in May last year and is currently due to expire this June.
“Debt will certainly be a very important theme of the Italian presidency,” Vigliotti said.
To further help poor countries, Italy will also urge the G20 to back the new issuance of $500 billion of the IMF’s own currency, known as Special Drawing Rights (SDR), the Italian G20 official said, describing this as “an absolute priority.”
Donald Trump’s previous US administration had blocked the idea of a new SDR issuance, a move akin to a central bank printing money, saying it would provide more resources to richer countries because their allocation would be proportionate to their IMF shareholding.
Vigliotti rejected this argument, saying rich countries that don’t need their allotted SDRs can give them back to the IMF facility that can in turn lend to poor ones.
“The goal is to ensure a new allocation of SDRs are made available to the countries most in need,” she said, adding that there was a “general consensus” on the subject within the G20.
“We count on the fact the new (Joe) Biden administration will have a different attitude on the issue,” she said.
Separately, a French G20 official also told Reuters that Paris was encouraged by signs that Biden will not block new SDRs as Trump did.
In general, the United States’ change of government has already had a “tangible” impact on G20 affairs, Vigliotti said, with a more constructive and multilateral approach to climate change and sustainable financial investment.
Italy’s G20 presidency has got off to a rocky start with the collapse of the government in Rome when a junior partner pulled out of the ruling coalition. Vigliotti played down the domestic political turmoil, saying it would not change the country’s G20 programme already agreed with its partners.
Favouring a fairer and more sustainable international tax system will be another priority of the Italian presidency, she said.