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France proposed an immediate debt service moratorium for poor countries and a massive debt cancellation in the long term.
Canada, France, Germany, Italy, Japan, the U.K., and the U.S., all of which make up the group of the world's seven most industrialized countries (G7), announced that they would support a temporary suspension of debt payments for the poorest countries if China also does.
"Ministers and governors noted that a number of the most vulnerable and poorest countries will face acute health and economic challenges related to the fallout of COVID-19," the G7 said through a statement.
They were “ready to provide a time-bound suspension on debt service payments due on official bilateral claims for all countries eligible for World Bank concessional financing, if joined by all bilateral official creditors in the G20 and as agreed with the Paris Club,” as FT reported”.
On Monday, the International Monetary Fund (IMF) Executive Board approved immediate debt relief for the world's 25 poorest countries, including Haiti, Afghanistan, Nepal, and Yemen.
These countries will receive financial aid from a catastrophe fund that will allow them to meet their debt obligations to the IMF for at least the next six months.
Developing countries have seen government debt increase over the past decade, making it difficult to finance policies aimed at dealing with Coronavirus.
If this happens, 76 poor countries would not be obliged to pay about US$20 billion for a year. If multilateral creditors also support the debt relief initiative, those countries would save an additional US$12 billion.
Regarding the African countries' debt cancellation, Macron argued that the debt burden has increased as their debts accounted for 30 percent of their Gross Domestic Product (GDP) in 2012 and that percentage has risen to 95 percent in 2020.
The volume of that debt represents about US$365 billion, 40 percent of which is controlled by China.