G20’s Common Framework for Debt Treatments & G20’s Debt Service Suspension Initiative ( DSSI )

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The G20’s Common Framework for Debt Treatments:

The G20’s Common Framework for Debt Treatments beyond the Debt Service Suspension Initiative (DSSI), known as the Common Framework (CF), was launched in November 2020. Its main aim is to strengthen the international debt architecture for the world’s poorest countries. The framework provides a support structure for official creditor coordination to facilitate timely, orderly, and durable debt treatment and to forge the principles of fair burden-sharing across official and private sector creditors. Only three debtor countries have so far requested treatment under the Common Framework (Chad, Zambia, and Ethiopia) and the process for each of these countries has suffered delays. Limited private sector participation has contributed to the delays.

The G20’s Debt Service Suspension Initiative (DSSI):

The G20’s Debt Service Suspension Initiative (DSSI), launched in April 2020, further illustrates the challenges of private sector participation in international debt initiatives. The DSSI offered debt payment suspension on official sector debts for the poorest countries to create fiscal space to respond to the COVID-19 pandemic. The DSSI called on private creditors to provide debt payment suspension on comparable terms with official sector bilateral creditors but stopped short of requiring debtor countries to seek comparable terms. The Institute of International Finance (IIF) prepared a comprehensive toolkit to facilitate private sector creditor participation. This included: (i) the basic framework for executing the DSSI between sovereign borrowers and private creditors, (ii) a template waiver agreement, (iii) a framework term sheet for non-bonded debt, and (iv) a technical note on consent solicitations2 . Despite the international community’s call for broad participation and the IIF’s active support for implementation, private sector participation in the DSSI was limited to a national development bank that participated as a private creditor. 

"Potential Statutory Options to Encourage Private Sector Creditor Participation in the Common Framework", © 2022 International Bank for Reconstruction and Development / The World Bank

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