Prime Minister Imran Khan spoke for all developing countries when he called for extending the G20’s debt suspension initiative for at least another year. Speaking via a video link at a high-level summit on ‘Financing for development in the era of Covid-19 and beyond’ on the sidelines of the 75th session of the UN General Assembly, he laid out a pretty elaborate plan detailing how some of the world’s richer countries could join hands with the leading International Financial Institutions (IFIs) to provide quick debt relief to some of the most vulnerable countries. The G20 debt moratorium got Pakistan elbow room worth about only a couple of billion dollars but it did give the government that much additional fiscal space when rolling out its own initiatives like the $8 billion relief package and the Ehsaas Programme, which goes to show that every little thing counts in a situation as unpredictable as this. Indeed G20 countries suggested initially that the initiative could be extended after it expires at the end of the year depending on the situation. And clearly since the situation hasn’t improved too much so far, nor is it likely to improve anytime soon, the world’s poorest and most indebted countries are going to continue to suffer the most from the steep global contraction that is under way. That alone makes for a pretty convincing case in favour of an extension and, as the PM went on to remind everybody, “Debt relief is one of the quickest ways to create fiscal space in developing countries.”

Considering the truly global nature of the Covid-19 emergency it seems the world’s rich countries have a responsibility of helping out poor countries, especially since the difference between paying and not paying right now is not just the possibility of default or steeper interest rates but utter collapse and perhaps even anarchy in some parts of the world. The International Monetary Fund (IMF) has just estimated that the developing world would require, on top of the G20 moratorium, an additional $2.5 trillion to recover from Covid - induced contraction and this money will have to come from somewhere. Why not save everybody all the trouble and just let them have one more year before they must also worry about paying back old loans in addition to worrying about raising more money to keep their economies running?

The only problem is that some of the richest and most powerful countries of the world are in acute states of contraction themselves. Most of them are also facing a second, and in some cases third, wave of the coronavirus and lockdowns are in the process of being reintroduced all over the place. A lot of these countries, especially the US, are not going to roll out any stimulus packages anytime soon while their central banks also seem to have run out of steam for the time being. Therefore they too would want to keep all channels of inflows, no matter how small, open at this time especially since their own internal markets could dry up if everything has to be kept shut down for too long. So, while the prime minister’s proposal makes a lot of sense, it might not get the resounding approval he would like from those whose signatures will be needed for the extension. Still, those countries work around a very complex web of IFIs, so if the will is really there it’s not as if circumstances permit no headway at all in the matter.

The Pakistani prime minister made all the right points at just the right platform. The world that emerges from the pandemic could well be very different from the one that was engulfed by it and what countries do now, especially how they keep their economies functioning and job markets intact, will determine how they look on the other side. In such circumstances it is only natural for weak countries to need the help of strong ones. Only if all countries are able to pool their resources together, and provide as much relief as possible to those in pressing debt, will everybody survive this and be able to rebuild after it. Imran Khan has got the UN thinking about this at just the right time.