By Andrea Shalal and Jorgelina do Rosario
WASHINGTON, Oct 14 (Reuters) – Western countries this week stepped up their criticism of China, the world’s biggest bilateral creditor, as the main obstacle to the implementation of agreements to restructure the economy. debt for the growing number of countries unable to service their debt.
US Treasury Secretary Janet Yellen said on Friday that high inflation, tighter monetary policies, monetary pressures and capital outflows were increasing the debt burden in many developing countries, and that further progress were urgently needed.
She said she discussed these issues at a dinner with African finance ministers and in many other sessions. The wealthy Group of Seven countries have also met with African finance ministers, who fear that the focus on the war in Ukraine will divert resources and attention away from their pressing concerns.
“Everyone agrees that Russia should stop its war against Ukraine, and that would solve the most important problems facing Africa,” Yellen told reporters at the annual meetings of the International Monetary Fund and the Bank. world in Washington.
But she added that a more effective debt restructuring process was also needed and that China had an important role to play.
“Really, the obstacle to greater progress is a major creditor country, namely China,” she said. “So there’s been a lot of discussion about what we can do to bring China to the table and to foster a more effective solution.”
With China being the missing piece of the puzzle in a number of ongoing debt talks in developing markets, the Group of 20 launched in 2020 a joint framework to bring creditors such as China and India to the negotiating table with the IMF, the Paris Club and private creditors.
Zambia, Chad and Ethiopia have asked to restructure under this new mechanism, which remains to be tested. Sri Lanka is set to start talks with bilateral creditors, including China, after a $2.9 billion staff-level deal with the IMF under a similar platform. Last month, Paris Club creditor nations reached out to China and India to closely coordinate negotiations over Sri Lanka’s debt, but are still awaiting a response.
The world’s poorest countries face $35 billion in debt service payments to public and private creditors in 2022, with more than 40% of the total owed to China, according to the World Bank.
Spanish Finance Minister Nadia Calvino, who chairs the IMF’s governing board, told Reuters in an interview on Thursday that there were growing concerns that China was not fully participating in debt relief efforts, noting that China had not sent officials to attend this week’s IMF in person. and World Bank meetings.
“China is a necessary partner. It is essential that we have them in the room and in discussions on debt relief,” Calvino said, adding that many heavily indebted countries were also being hit hard by the crisis. inflation and climate shocks.
German Finance Minister Christian Lindner also joined in growing criticism over China’s lack of timely involvement in debt restructuring for low-income countries. China has argued that it will not participate in some cases unless the IMF and World Bank also take a haircut.
Lindner told reporters that he regretted that China did not accept his invitation to participate in the G7 roundtable with African countries. (Reporting by Andrea Shalal; Editing by Paul Simao)