By David Lawder

WASHINGTON (Reuters) – Some G20 creditor countries are reluctant to broaden and extend another year of coronavirus debt service relief to the world’s poorest countries, so a six-month compromise may emerge this week, World Bank President David Malpass said on Monday.

Malpass, speaking to reporters as the World Bank’s and International Monetary Fund’s virtual annual meetings get under way, said G20 debt working groups have not reached agreement on the two institutions’ push for a year-long extension of the G20 Debt Service Suspension Initiative (DSSI).

“I think there may be compromise language that may be a six-month extension (and) that it can be renewed depending on debt sustainability,” Malpass said.

Finance ministers and central bank governors from the G20 major economies are scheduled to meet by videoconference on Wednesday. In May, they launched an initiative to allow poor countries to suspend payments on official bilateral debt owed to G20 creditor countries until the end of 2020, which Malpass said has freed up $5 billion to bolster coronavirus responses so far.

Malpass and IMF Managing Director Kristalina Georgieva have been warning that far more debt relief is needed for poor and middle-income countries, including principal reduction, to avoid a “lost decade” as the pandemic destroys economic activity.

Malpass said the two institutions would propose a joint action plan to reduce the debt stock for poor countries with unsustainable debts.

But he said debtor nations were too “deferential” to creditor countries and needed to more forcefully demand a smaller debt burden. “That dialogue hasn’t been as robust yet as I think is necessary to move this process along.”

A new World Bank debt study published on Monday showed that among countries eligible for the G20 debt relief program, external debt climbed 9.5% in 2019 to $744 billion before the

G20 countries may only approve a six-month debt relief extension amid lagging committment to the pact meant to help poor nations weather the pandemic, World Bank President David Malpass said on Monday.

The G20 group of largest economies is set to meet Wednesday after they pledged in April to suspend debt service from the world’s poorest countries through the end of the year as they faced a sharp economic contraction caused by Covid-19.

However, Malpass said relief has been weaker than expected because “not all of the creditors are participating fully,” with only $5 billion granted under the expected $8 to $11 billion, and China among the countries that holding back.

Even with the pandemic still raging, he said another full year of debt suspension is unlikely.

“I think there will be compromise language (on) maybe a six-month extension that can be renewed depending on debt sustainability,” he told reporters.

The Washington-based development lender on Monday said the debt of the world’s 73 poorest countries grew 9.5 percent last year to a record $744 billion, which shows “an urgent need for creditors and borrowers alike to collaborate to stave off the growing risk of sovereign-debt crises triggered by the COVID-19 pandemic.”

World Bank President David Malpass said both private creditors and major economies needed to step up debt relief efforts for poor countries World Bank President David Malpass said both private creditors and major economies needed to step up debt relief efforts for poor countries Photo: AFP / Brendan Smialowski

The countries’ debt burden owed to government creditors, most of whom are G20 states, reached $178 billion last year, according to the report released as the World Bank begins its annual meetings along with the IMF.

China is the largest of those creditors, seeing its share of the debt owed to all G20 countries rise to 63 percent by the end of last year from 45 percent in 2013.

Malpass decried what