China calls for ‘joint action’ in debt settlements at G20
BEIJING – China, the world’s largest bilateral creditor, urged G20 nations on Friday to conduct a fair, objective and in-depth analysis of the causes of global debt issues and to “resolve the problem in a comprehensive and effective manner.”
Liu Kun, China’s finance minister, joined a meeting of the bloc’s finance ministers and central bank chiefs in Bengaluru, India via video link, putting pay to speculation that he could meet U.S. Treasury Secretary Janet Yellen on the sidelines of the gathering.
The United States has repeatedly criticized China over what it considers to be “foot-dragging” on debt relief for dozens of low-and middle-income countries.
According to a statement released by his ministry, Liu said that international financial institutions and commercial creditors should follow the principle of “joint action, fair burden” in debt settlements.
China has been consistent in criticizing multilateral lenders for not taking haircuts on loans extended to debtor countries while being asked to do so on credit it has extended bilaterally.
Officials from the IMF, the World Bank and G7 nations will meet on Saturday on the sidelines of the G20 meeting for the first in-person discussions of the new IMF Global Sovereign Debt Roundtable.
IMF officials have stated that its new forum does not intend to discuss country-specific debt restructuring issues.
China’s role in the G20 Common Framework, however, is expected to feature in Saturday’s talks. The Common Framework was set up in late 2020 by the Group of 20 major economies to offer relief to low-income countries facing mounting pressures resulting from COVID-19 and tightening global financial conditions.
On Feb. 15, Reuters reported that India would table a proposal for G20 lenders, including China, to help debtor nations badly hit by the economic fallout from the pandemic and Ukraine war by taking a large haircut on their loans.
Officials from Ghana and Zambia are waiting on assurances from China that it would be willing to offer debt-restructuring support, as such assurance is a prerequisite to use the Common Framework to receive further assistance from the IMF.
Zambia owed Beijing nearly $6 billion of a total external debt of $17 billion at the end of 2021, according to government data, while Ghana owes China $1.7 billion, according to the International Institute of Finance, a financial services trade association focussed on emerging markets.
Classified as a middle-income country and as such ineligible for the the Common Framework, Sri Lanka is still seeking similar assurances from China, though Bloomberg has reported that the IMF is considering approving a loan to support the island nation regardless of what China decides.
Sri Lanka owed Chinese lenders $7.4 billion – or nearly a fifth of public external debt – by the end of 2022, calculations by the China Africa Research Initiative think tank have shown.
