Question map
With reference to the "G20 Common Framework", consider the following statements : 1. It is an initiative endorsed by the G20 together with the Paris Club. 2. It is an initiative to support Low Income Countries with unsustainable debt. Which of the statements given above is/are correct ?
Explanation
The correct answer is Option 3 (Both 1 and 2) because the G20 Common Framework for Debt Treatments is a joint initiative designed to coordinate debt restructuring for vulnerable nations.
- Statement 1 is correct: The framework was officially endorsed in November 2020 by the G20 along with the Paris Club (a group of mostly Western creditor nations). This partnership was significant as it brought major non-Paris Club creditors, specifically China, into a common coordinated platform for the first time.
- Statement 2 is correct: The primary objective of the framework is to assist Low Income Countries that face unsustainable debt levels, exacerbated by the COVID-19 pandemic. It allows these countries to apply for debt relief or restructuring to ensure long-term fiscal sustainability.
Since both statements accurately describe the origin and purpose of the initiative, Option 3 is the right choice.
PROVENANCE & STUDY PATTERN
Full viewThis question tests the 'Institutional Architecture' of global crisis response. It is a pure Current Affairs question derived from the post-COVID debt crisis. The key was recognizing the historic collaboration between traditional Western creditors (Paris Club) and emerging creditors like China (via G20).
This question can be broken into the following sub-statements. Tap a statement sentence to jump into its detailed analysis.
- Explicitly states the framework was jointly developed by the G20 and the Paris Club.
- Links the joint development to the post-COVID context when the initiative was launched.
- Describes the Common Framework as an agreement of G20 and Paris Club countries.
- Frames the initiative as a formal arrangement between those groups.
- Notes the agreement includes all members of the G20 and the Paris Club, indicating joint endorsement.
- Mentions formal adoption and publication steps tied to G20 processes.
Defines G20 as a forum of major economies that brings members together to discuss key global economic issues, implying it can launch collective initiatives or frameworks.
A student could use this to infer that if the Common Framework exists it may plausibly have been launched by the G20 and then check whether another creditor group (Paris Club) was formally involved.
G20 is explicitly credited with creating specific initiatives (Global Infrastructure Outlook via the Global Infrastructure Hub), showing the G20 launches themed institutional initiatives.
One can extend this pattern to ask whether the Common Framework follows a similar model (G20-originated) or whether it names/credits an external creditor body such as the Paris Club.
Describes the G20 producing concerted work that led to an international multilateral instrument (MLI) signed in Paris, showing G20-driven processes can culminate in instruments signed at/with other venues or actors.
A student might use this as a precedent to consider that the Common Framework could be a G20-driven product that involved or was later coordinated with other creditor groups (e.g., Paris Club) and then look for explicit joint endorsement.
- Explicitly states the Common Framework was launched to strengthen debt architecture for the world’s poorest countries.
- Describes the framework as providing a support structure for official creditor coordination, implying assistance for debt issues.
- States the Common Framework focuses on cases involving a challenging debt burden, i.e., debt‑distress situations.
- Notes debt restructuring can be initiated upon a country’s request and prioritizes measures (maturity extensions) to relieve low‑income countries.
Describes 'debt-for-nature swaps' and debt forgiveness as mechanisms used to address unsustainable debts of developing countries.
A student could note that the Common Framework might use similar debt-relief or restructuring instruments for distressed countries and check G20 documents for analogous mechanisms.
Explains IMF concessional lending facilities specifically targeted to Low‑Income Countries (LICs) for balance‑of‑payments problems and relief.
One could infer that international frameworks addressing LIC debt distress often involve coordinated concessional support, and therefore look for coordination between G20 and IMF under the Common Framework.
Defines debt restructuring and debt overhang as tools and concepts used when debt is unpayable or deterring investment.
A student could reason that the Common Framework likely addresses restructuring procedures for countries in debt distress and then verify whether it formalizes such procedures.
Frames 'ecological debt' and links unsustainable/unpayable external debt to calls for countermeasures by creditors.
This suggests a precedent for creditor action when debts are unsustainable; a student could check whether the Common Framework is one such creditor-coordinated response for LICs.
G20 is identified as a forum of major economies that addresses key global economic issues, implying it could coordinate international responses to sovereign debt problems.
A student might combine this with the concept of debt restructuring to hypothesize the G20 could host a framework (like the Common Framework) to support distressed countries and then seek primary G20 texts.
- [THE VERDICT]: Standard Current Affairs (Medium). Covered in major newspapers (The Hindu/IE) and monthly compilations (Economy/IR sections) during late 2020/2021.
- [THE CONCEPTUAL TRIGGER]: Global Economic Governance & Sovereign Debt Management (Post-COVID context).
- [THE HORIZONTAL EXPANSION]: 1. Precursor: DSSI (Debt Service Suspension Initiative). 2. Paris Club: 22 members (mostly West); India/China are NOT members. 3. Eligibility: 73 Low-Income Countries (IDA eligible). 4. First applicants: Chad, Ethiopia, Zambia. 5. 'Comparability of Treatment' clause (private creditors must match official terms).
- [THE STRATEGIC METACOGNITION]: When a global framework launches, map the 'Creditor-Debtor' matrix. Who is lending (G20+Paris Club)? Who is borrowing (LICs)? Why now (Unsustainable debt)? The unique feature here was bringing China (G20) and the West (Paris Club) onto one platform.
G20 is a grouping of finance ministers and central bank governors representing major economies and a large share of global GDP, so its endorsements carry economic policy weight.
High-yield for UPSC: questions often ask about international economic groupings, their composition and authority. Mastering what the G20 is and who it represents helps distinguish actions that can legitimately be ascribed to it versus to other institutions; it links to topics on global economic governance, IMF/World Bank relations and India's role in multilateral forums.
- Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 18: International Economic Institutions > B G<sub>20</sub> > p. 547
The G20 has launched named initiatives (for example, the Global Infrastructure Outlook), showing it can originate policy frameworks and programs.
Useful for UPSC candidates to assess claims about who launched or endorsed international frameworks. Knowing that G20 can initiate programs helps evaluate statements about joint launches with other bodies and connects to questions on multilateral cooperation and initiative ownership.
- Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 15: Infrastructure > GLOBAL INFRASTRUCTURE OUTLOOK > p. 442
Debt‑for‑nature swaps and targeted debt forgiveness convert portions of sovereign debt into domestic investment for conservation or social spending to relieve unsustainable external liabilities.
High‑yield for UPSC because it links international debt relief to environmental and development policy; useful for questions on innovative finance, sustainable development and creditor‑debtor negotiations. Helps answer policy‑comparison and evaluation questions on financing climate and conservation goals.
- Geography of India ,Majid Husain, (McGrawHill 9th ed.) > Chapter 17: Contemporary Issues > Utilisation of Resources > p. 90
- Environment and Ecology, Majid Hussain (Access publishing 3rd ed.) > Chapter 6: Environmental Degradation and Management > the developing countries as creditor > p. 54
The IMF provides concessional lending facilities under the Poverty Reduction and Growth Trust specifically designed for low‑income countries to address prolonged or urgent balance‑of‑payments problems.
Essential for UPSC aspirants studying international financial institutions and crisis responses; connects to topics on IMF tools, conditionality, and policy measures for LICs. Enables answers on institutional roles and loan instrument comparisons.
- Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 18: International Economic Institutions > Concessional Lending > p. 517
Debt restructuring involves haircuts, interest reductions or term extensions to avoid default, while debt overhang describes how heavy external debt deters new investment.
Crucial for questions on sovereign debt crises, macroeconomic recovery and reform strategies; links to fiscal policy, investment climate and restructuring negotiations. Prepares candidates for case analyses of debt‑distress episodes.
- Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 16: Terminology > 16 Terminology > p. 455
- Environment and Ecology, Majid Hussain (Access publishing 3rd ed.) > Chapter 6: Environmental Degradation and Management > the developing countries as creditor > p. 54
The 'Comparability of Treatment' principle: The Common Framework requires that the debtor country must seek debt relief from private creditors (banks, bondholders) on terms at least as favorable as those obtained from official government creditors.
Use the 'Bureaucratic Specificity' heuristic. Statement 1 describes a specific, plausible institutional partnership (G20 + Paris Club). UPSC rarely fabricates complex joint endorsements in correct-sounding administrative statements. If the partnership makes geopolitical sense (uniting all major creditors), mark it True.
Mains GS-II (IR): 'Effect of policies of developed and developing countries on India’s interests.' This framework represents a shift from the Western-dominated Paris Club monopoly to a multipolar debt negotiation table involving India and China.