World Bank economist tells G20: 'Be bold,' move quickly on debt reductions

By Andrea Shalal

WASHINGTON (Reuters) - The Group of 20 major economies should move quickly and decisively to reduce the debts of heavily indebted countries or risk a "lost decade" in terms of global development, World Bank chief economist Carmen Reinhart said on Wednesday.

G20 finance ministers are set to finalize work on a common framework for dealing with debt issues when they meet in early November, Reinhart told an event hosted by the European Bank for Reconstruction and Development.

"Be bold," Reinhart said, when asked about her advice to G20 leaders during an event hosted by the European Bank for Reconstruction and Development. "This is not the moment of being timid on debt crisis resolution. Proposals need to be bold in terms of delivering debt reduction for the debtors, because if not ... the risks of a lost decade are very big."

She said the COVID-19 pandemic had exacerbated already staggering debt problems in many countries, and it was critical for the G20 countries to move forward quickly with "bigger, more ambitious proposals" on debt reduction.

G20 finance officials agreed on Oct. 14 to extend their Debt Service Suspension Initiative (DSSI), which allows the poorest countries to suspend debt payments to official bilateral creditors, until mid-2021.

They also agreed in principle on a "Common Framework" to deal on a case-by-case basis with the rising number of low-income countries facing debt distress, but that measure must still be endorsed by the countries.

Finance officials will work on that issue when they meet November, ahead of a summit of G20 leaders later in the month.

Reinhart told the event there were still big differences among G20 leaders about the need to reduce the debts of low-income countries, and China, a major creditor, was still unwilling to accept the prospect of debt write-offs.

(Reporting by Andrea Shalal; editing by Jonathan Oatis)