China, as the world’s largest creditor, must step up‘ debt restructuring efforts, Indonesia’s Indrawati said.
WASHINGTON (Reuters) : Reuters talked to this year’s group of 20 finance chiefs. They said that because China is the world’s biggest creditor, it has to lead the way in dealing with the debt crisis that is threatening many low-income and developing market countries around the globe.
Sri Mulyani Indrawati, Indonesia’s finance minister, welcomed the news on Friday that China would join a creditor committee for Zambia, one of three nations seeking debt relief under the G20 Common Framework negotiated with the Paris Club of official creditors.
Indrawati said that further effort was required to move Zambia’s long-stalled debt process ahead and that other nations will also need debt relief and restructuring in the future.
“There will be further instances,” Indrawati said. At some point, China must acknowledge that they must step up and provide a venue for all creditors to negotiate a way for this restructuring to take place.
Kristalina Georgieva, Managing Director of the International Monetary Fund, said Thursday that China has agreed to join Zambia’s creditor committee in response to the country’s finance minister’s concerns over delays in debt restructuring.
Zambia went bankrupt for the first time in the COVID-19 pandemic period in 2020. It had a debt load of about $32 billion, or about 120 percent of its GDP.
Georgieva, US Treasury Secretary Janet Yellen, and others have urged measures to expedite and streamline the debt restructuring process.
It’s also signed by Ethiopia and Chad, which joined the Common Framework more than a year ago but haven’t yet had their debts forgiven, as well.
According to Western authorities, China, which has become the world’s biggest creditor, hasn’t been willing to move forward with restructuring deals.
During this week’s spring meetings of the IMF and World Bank, G20 members expressed their concern about the slow-moving debt restructuring process. Around 60% of low-income countries are in or are at risk of financial crisis.
“After much negotiation, particularly over China’s participation, they decided to form the creditor committee,“ Indrawati said. “That is advancement.”
“Because they are gaining prominence and dominance, they must also take responsibility and lead in resolving this kind of scenario,“ she continued.
Indrawati said that the Paris Club might serve as a guide, but existing creditors, including China, must agree on how to handle nations who are unable to fulfil their obligations. She thinks that the G20 countries will make progress this year on revising the Common Framework to make it more effective.
(This item has been updated to delete an erroneous word from the first paragraph.)
