Moody's and the United Nations Clash Over Debt Repayment Deferral for Poorest Countries

Moody's Reviews Credit Rating Downgrades for Ethiopia and 4 Other Countries
"Risk to Private Investors" Cited
UN States "Credit Rating Downgrade Not Acceptable"

[Asia Economy Reporter Jeong Hyunjin] The international credit rating agency Moody's is clashing with the United Nations (UN) over its characterization of the debt repayment suspension program participation by the Group of Twenty (G20) as a form of 'risk,' mentioning five countries?Ethiopia, Pakistan, Cameroon, Senegal, and C?te d'Ivoire?as candidates for sovereign credit rating downgrades.

According to major foreign media on the 20th (local time), Moody's viewed the G20's debt repayment deferral measure for poor countries, supported by the World Bank (WB), as a risk to private investors holding sovereign bonds of those countries. By requiring the G20 to offer similar relief to private creditors, the risk of losses could increase.

In response, the UN criticized Moody's stance, arguing that the debt repayment suspension program should enhance the debt sustainability of the countries involved and should not be a reason for credit rating downgrades. The UN emphasized, "Countries that borrow money should exit the program with better credit ratings than before participating."

This program was initiated last April to assist poor countries struggling with debt repayments due to the impact of COVID-19. For eligible borrowers, debt repayments were suspended until the end of this year and scheduled to be repaid over four years. The WB estimated that 73 countries would participate, with approximately $11.5 billion in debt repayments deferred.

However, according to the G20, only 42 countries have applied so far, and among them, 18 countries have signed agreements with the Paris Club, a creditor consortium established to resolve intergovernmental debt issues, foreign media reported.

In response to the UN's concerns, Moody's reportedly stated that the previous review concluded with an 'open-ended' outcome and mentioned uncertainty about whether private investors would incur losses as a result of the debt repayment suspension program in these countries.

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