The G20’s formal endorsement of the Common Framework for Debt Treatments at its November 20–21 virtual leaders’ summit is good news for poor debtor countries. Although this gives cause for optimism, there remain many stumbling blocks along the way.

This G20 initiative is based on the agreements reached by the Paris Club at the start of the year, and on the debt-service relief and 100 billion US dollars of new funding provided by the IMF to 82 countries since the pandemic began. Support from the G20, the Paris Club and the IMF should prevent many defaults and the long-term effects that these have on weaker economies.

It is also based, for the first time, on all the world’s major lenders agreeing on a joint framework for restructuring public debt. This includes China, whose loans have traditionally been characterized by a lack of transparency and which is often accused of worsening the indebtedness of low-income countries (LICs).

In other words, the framework recognizes that the COVID-19 pandemic will leave many low-income countries in need of major debt relief. A level playing field. This is important, firstly because creditor countries will have to negotiate jointly with each debtor on the basis of common guidelines; and this debtor, in turn, will ask the private sector for the same treatment conditions as the rest. But also—and this is critical—because debts owed to Chinese state banks will fall within the Common Framework, which guarantees the sustainability of emerging third-country debts in the future.

However, agreeing on the Common Framework is not a magic wand for several reasons:

For one thing, the signatories will have to keep their promises. The demand of debtors may be greater than the willingness of creditors to meet it. Creditors may be unable to form a united front. Geopolitics, too, could play a role, given the increased strategic competition between and China the US.

At the same time, the full impact of the pandemic on the world economy is still unknown. Western economies are considering reintroducing disruptive lockdowns and containment measures. In addition, some rich creditor countries, who are tackling this crisis with their own debt-financed measures, might be reluctant to show any compassion to low-income countries, as they may believe their difficulties are their own fault.

Furthermore, many debtor countries—often larger and less developed economies—are not covered by the Framework at all.

Finally, most low-income countries are vulnerable for reasons that the pandemic will have exacerbated. The global economic shock has suppressed commodity prices, on which many LICs are overdependent. Increased pressure on inherently unstable political systems may have caused them to fracture and led to a reduction in external confidence.

The efforts of the IMF, the Paris Club and the G20 aim to avoid systemic failure: a widespread collapse of the economies of low-income countries that could cause an ecological, political and humanitarian disaster. These efforts will not save all low-income countries from defaults and enormous economic and political damage. Nor do they address another key factor determining the ability of low-income countries to economically recover from the pandemic, namely, guaranteed access to the COVID-19 vaccine. However, these measures should save most low-income countries from avoidable default, which is an important step.