G20 Reaffirms Support for Debt Relief and Sustainable Financing for Developing Nations

The G20 reaffirmed its commitment to enhancing the Common Framework for Debt Treatments beyond the Debt Service Suspension Initiative (DSSI).

 

The Group of Twenty (G20) Finance Ministers and Central Bank Governors has reaffirmed its strong commitment to help low- and middle-income countries manage debt vulnerabilities through comprehensive and systematic approaches. This commitment, contained in the Ministerial Declaration on Debt Sustainability issued on Thursday, underscores the bloc’s recognition that debt distress remains a key obstacle to inclusive global growth.

The statement was adopted at the conclusion of the fourth G20 Finance Ministers and Central Bank Governors meeting held in Washington, D.C., USA, on the sidelines of the International Monetary Fund (IMF) and World Bank Annual Meetings.

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Addressing Debt as a Barrier to Inclusive Growth

In the declaration, the ministers and governors noted that high levels of sovereign debt continue to constrain the fiscal capacity of developing economies, hindering their investments in infrastructure, healthcare, education, climate resilience, and poverty reduction.

“We recognise that a high level of debt is one of the obstacles to inclusive growth in many developing economies, which limits their ability to invest in infrastructure, disaster resilience, healthcare, education and other development needs,” the declaration read.

While the risk of a systemic global debt crisis remains contained, the declaration highlighted that many vulnerable economies face growing financial stress, driven by high borrowing costs, external refinancing pressures, and a decline in private capital inflows.

Over the past decade, interest payments on total external public debt have more than doubled for low-income countries (LICs), posing a direct threat to fiscal sustainability and social spending priorities.

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Strengthening Global Debt Mechanisms

The G20 reaffirmed its commitment to enhancing the Common Framework for Debt Treatments beyond the Debt Service Suspension Initiative (DSSI). The framework, launched in 2020 during the height of the COVID-19 pandemic, provided temporary debt relief to low-income countries to cushion the economic shock.

“We reiterate our commitment to further strengthen the implementation of the Common Framework for Debt Treatments beyond the DSSI in a predictable, timely, orderly, and coordinated manner,” the declaration stated.

This renewed commitment aims to streamline debt restructuring processes, improve coordination among creditors, and ensure faster resolution of debt crises, particularly in economies with overlapping bilateral, multilateral, and private debts.

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Enhancing Debt Transparency and Accountability

A major emphasis of the declaration was on debt transparency, which the G20 considers vital for effective risk assessment and crisis prevention. The ministers and governors called for greater disclosure from all stakeholders, including private creditors, state-owned enterprises, and recipient governments.

They also voiced support for the ongoing review of the IMF–World Bank Low-Income Countries Debt Sustainability Framework (LIC-DSF), a tool used to evaluate the debt sustainability of poorer nations.

The updated framework is expected to improve the analytical basis of the Debt Sustainability Analysis (DSA), enabling more accurate risk assessments and better policy interventions.

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Innovative Debt Solutions: Climate and Development Swaps

The G20 also acknowledged the growing potential of innovative financial instruments to ease debt burdens while promoting sustainable development. These include debt-for-development and debt-for-climate swaps, which allow debtor countries to redirect repayment obligations into environmental or social investments.

“We note the efforts to explore the consideration of the use of liability management operations and debt-for-development, debt-for-climate, or similar swaps on a voluntary and case-by-case basis, with a balanced view on their benefits and limitations to help strengthen debt sustainability,” the statement noted.

Additionally, the ministers expressed openness to the voluntary use of crisis-resilient debt clauses, which can provide temporary relief to countries hit by natural disasters or other external shocks.

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Collaboration Through the Global Sovereign Debt Roundtable

The declaration reaffirmed the G20’s support for multilateral dialogue through mechanisms such as the Global Sovereign Debt Roundtable (GSDR)—a platform co-chaired by the IMF, World Bank, and G20 Presidency. The GSDR facilitates discussions between debtor countries, creditors, and international institutions to accelerate debt resolution processes and build consensus on fair restructuring frameworks.

The G20 further emphasised the importance of listening to borrower countries, ensuring that debtor voices are central to global debt governance.

“It is important to engage with and enhance the voice of borrower countries,” the declaration said, urging greater inclusivity in debt-related policy decisions.

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Capacity Building and Financial Management Reform

Beyond immediate relief measures, the G20 also highlighted the need to strengthen long-term domestic debt management and public financial governance in developing nations. It encouraged countries to improve debt data recording, transparency mechanisms, and public resource mobilisation through tax reform and institutional strengthening.

“We underscore the importance of addressing gaps in debt management, debt transparency, public financial management, and domestic resource mobilisation and will continue to advance adequate capacity-building initiatives to this end,” the declaration concluded.

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Broader Implications for Global Economic Stability

The G20’s renewed commitment comes amid growing concern over sovereign debt pressures in the Global South, where countries such as Zambia, Ghana, and Sri Lanka have already sought restructuring support. Global financial institutions warn that without coordinated action, more nations could slide into debt distress, undermining development gains and global economic recovery.

The declaration represents a crucial step in ensuring that international debt architecture evolves toward fairness, efficiency, and sustainability—with the G20 reaffirming its role as a catalyst for coordinated global solutions.