FM Sitharaman underlines need to improve effectiveness of G20 Common Framework : GS TIMES IAS-PCS

Finance Minister Nirmala Sitharaman on July 15 underlined the need to improve the effectiveness of the G20 Common Framework.

She said this while speaking at the third session on the International Financial Architecture in Bali, Indonesia, which is hosting the third G20 Finance Ministers and Central Bank Governors meeting.

About G20 Common Framework

The G20 Common Framework for debt treatment beyond the DSSI (Common Framework) is an initiative endorsed by the G20, together with the Paris Club, to support, in a structural manner, Low Income Countries with unsustainable debt.

At the start of the pandemic, the World Bank and the International Monetary Fund urged the G20 to set up the DSSI (Debt Service Suspension Initiative). Established in May 2020, the DSSI helped countries concentrate their resources on fighting the pandemic and safeguarding the lives and livelihoods of millions of the most vulnerable people. Forty-eight out of 73 eligible countries participated in the initiative before it expired at the end of December 2021.

The G20 Common Framework is intended to deal with insolvency and protracted liquidity problems, along with the implementation of an IMF-supported reform program.

G20 official creditors—both traditional “Paris Club” creditors, such as France and the United States, and new creditors, such as China and India, overtook the Paris Club as lenders in the last decade—agreed to coordinate to provide debt relief consistent with the debtor’s capacity to pay and maintain essential spending needs.

The Common Framework requires private creditors to participate on comparable terms to overcome collective action challenges and ensure fair burden sharing.

FM Sitharaman underlines need to improve effectiveness of G20 Common Framework