Global asset managers must cancel debt of poor countries, charity report says

The world's biggest private asset managers should be forced to forgive poor countries' debt so they can cope with Covid-19 and avoid major unrest, a report from a group of charities said on Wednesday.

While G20 governments have frozen low-income countries' loan repayments during the pandemic under the Debt Service Suspension Initiative (DSSI), private creditors have continued to get paid except by countries like Argentina, Ecuador, Lebanon, Belize and Zambia that were heading for default anyway.

The report from the European Network on Debt and Development (Eurodad), comprising 50 non-governmental organisations, warned the debt load was causing health, social, political and economic problems.

"The costs of inaction on commercial creditor participation are already unsustainable," the report's main author, Daniel Munevar, said. "We are seeing massive human suffering."

"Unrest is going to escalate," Munevar said.

Nearly 550 private sector bonds issued by 62 low- and middle-income countries total $691 billion in principal and will cost around $330 billion in debt service over the next five years, the report said.

The top 25 known holders of that debt are led by US-based asset managers BlackRock Inc, Allianz SE unit PIMCO and AllianceBernstein.

For BlackRock - the world's largest asset manager - cancelling DSSI countries' $18.7 billion of total private sector debt would be the equivalent of a person with the average U.S. net worth of $65,904 taking a $15 loss, the report estimated.

AllianceBernstein, JPMorgan Chase and Amundi had a particularly strong presence in sub-Saharan Africa where the debt problems are the most acute.

Loan payments on $70 billion to $80 billion in extra International Monetary Fund financing last year and this year will hit as the analysed countries face $85 billion in private debt repayments in 2024 and 2025, more than double the $35 billion due this year, Eurodad said.

Reuters