Debt Service Suspension Initiative could save countries around $12 billion

The Debt Service Suspension Initiative (DSSI) has benefitted Low-Income Countries, and 73 countries could save around $12 billion ($11,542.3billion) as of 22nd June, 2020 update. Talking about Debt and investment transparency for better outcomes, David Malpass, President of the World Bank Group said since the COVID-19 outbreak, developing economies have suffered unprecedented capital outflows.

“To reverse these outflows and make debt and investment more productive, it is critical to embrace strong principles of debt and investment transparency” he said. Whilst emphasising that such transparency involves many difficult steps, but today we’re taking an important one, “we are disclosing new information on the creditor country composition of projected annual debt service payments of all 73 countries eligible for relief under the Debt Service Suspension Initiative (DSSI).”

The World Bank Group has created a virtual one-stop for the latest information about DSSI. It highlights the potential savings for each eligible country—both in dollar terms and as a percentage of GDP. This allows visitors to look up more detailed country-by-country information from the World Bank Group’s Debtor Reporting System (DRS) database and provides useful links to related information such as DSSI Q&As and other key World Bank and G20 documents.

“I believe it is important to have detailed and timely public disclosure of debt service payments that may be deferred. I believe it is important to have detailed and timely public disclosure of debt service payments that may be deferred” he said. This he stated will enable stakeholders—governments as well as the private sector and the public at large—to keep track of the progress being made in the implementation of DSSI while highlighting the growing importance of debt transparency.

“Today we are disclosing more disaggregated data in the DRS than in the past and in the future, we will be seeking support from borrowing countries on a mechanism to disclose even more granular information on debt payments.” This, of course, is only a start and that their goal is to increase the breadth and quality of debt data available here and elsewhere. Going forward, borrowing countries and creditors he said need to achieve sustained progress on five key principles to improve debt transparency and improve investment flows.

He said that they need to spell out loan contract terms and payment schedules; full disclosure of the stock of public and publicly guaranteed debt, SOE liabilities, and debt-like instruments, enable borrowers to seek relief from excessive confidentiality clauses so they can proceed with more transparent data reporting,  promote effective and prudent use of collateral and liens in sovereign borrowing; and insist that borrowers and lenders avoid violations of legal requirements of other creditors, such as negative pledge clauses.

“The transparency of all government financial commitments and investments is a key step in creating an attractive investment climate and could make substantial progress this year to deliver better outcomes for people in developing countries.” Sierra Leone is a DSSI participant and has a risk of external and overall debt distress that is high which is reflected in the published Debt Sustainability Analysis (DSA) ratings as of end-May 2020. The date of DSA publication for Sierra Leone was December 2018.

The country has a potential DSSI Savings of USD 7.0 million which also correspondingly have a potential DSSI Savings of 0.2% of 2019 GDP.

By Zainab Iyamide Joaque