Western countries this week ratcheted up their criticism of China, the world’s largest bilateral creditor, as the main obstacle to moving ahead with debt restructuring agreements for the growing number of countries unable to service their debts.
US Treasury Secretary Janet Yellen said on Friday that high inflation, tightening monetary policies, currency pressures and capital outflows were increasing debt burdens in many developing countries, and more progress was urgently needed.
She said she discussed those issues during a dinner with African finance ministers and in many other sessions.
The Group of Seven Rich Nations also met African finance ministers, who worry that the focus on the war in Ukraine is draining resources and attention from their pressing concerns.
“Everyone agrees Russia should stop its war on Ukraine, and that would address the most significant problems that Africa faces,” Yellen told reporters at the International Monetary Fund (IMF) and World Bank annual meetings in Washington.
But she said a more effective debt restructuring process was also needed, and China had a big role to play.
“Really, the barrier to making greater progress is one important creditor country, namely China,” she said. “So there has been much discussion of what we can do to bring China to the table and to foster a more effective solution.”
As China is the missing piece in the puzzle of a number of debt talks under way in developing markets, the Group of 20 launched in 2020 a Common Framework to bring creditors such as China and India to the negotiation table along with the IMF, Paris Club and private creditors.
Zambia, Chad and Ethiopia have applied to restructure under this new, yet-to-be tested mechanism. Sri Lanka is set to start talks with bilateral creditors including China after a $2.9 billion staff-level agreement with the IMF under a similar platform.
Published in The Express Tribune, October 16th, 2022.
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