This archive report was first published on 24 June 2020.
On June 24, 2020, Fitch Ratings noted that China's participation in the G20 debt service suspension initiative (DSSI) could provide relief to some emerging markets struggling with the COVID-19 pandemic.
China has committed to participating in the DSSI, which temporarily suspends debt repayments for 77 developing nations between May and December. This move is significant, as China is the single largest bilateral creditor to these countries, accounting for over a quarter of their total external debt.
According to Fitch, some countries, such as Kenya, have expressed concerns that seeking debt relief could harm their ability to tap capital markets. However, others, like Angola, may agree to more extensive relief than initially envisioned.
President Xi Jinping emphasized the importance of consulting with African countries to work out arrangements for loans with sovereign guarantees. Fitch views such loans as bilateral debt.
China's involvement in the G20 initiative marks the first time it has participated in coordinated, multilateral global debt relief efforts. Relief from debt service obligations owed to China could play a role in easing liquidity strains faced by a small subset of the countries eligible for the DSSI.
