Sovereign debtors, creditors agree on steps to jumpstart debt restructurings

People attend the 2023 Spring Meetings inside the International Monetary Fund in Washington, U.S., April 12, 2023. REUTERS/Elizabeth Frantz

WASHINGTON—Global creditors, debtor nations and international financial institutions on Wednesday agreed to improve data sharing, set clearer timetables and take other steps aimed at jumpstarting debt restructuring processes.

The World Bank, International Monetary Fund and India, current president of the Group of 20 (G20) major economies, issued a joint statement after the first full-fledged meeting of the new Global Sovereign Debt Roundtable, held during the spring meetings of the IMF and World Bank in Washington.

The statement, however, did not include mentions of any commitments by China, the world’s largest bilateral creditor, to speed the restructuring process.

Reuters reported Beijing was poised to drop its demand that multilateral development banks share in debt restructuring losses, partly in exchange for the IMF and World Bank providing earlier access to their debt sustainability analyses for countries receiving debt treatments.

READ: China to drop demand for development bank debt restructuring losses—source

But the statement only included the institutions’ part of that bargain, to share more information more quickly and for development banks to quantify “net positive flows” of concessional financing in restructuring cases.

“The discussion focused on the actions that can be taken now to accelerate debt restructuring processes and make them more efficient, including under the G20 Common Framework,” the statement said.

The meeting came amid ongoing delays in finalizing debt treatment agreements for Zambia, Ghana and Ethiopia under the G20 Common Framework, although IMF strategy chief Ceyla Pazarbasioglu on Wednesday said she hoped for “good news” on Zambia’s case next week.

U.S. officials and others blame the delays largely on foot-dragging by China, now the world’s largest bilateral creditor, and reluctance by private-sector creditors to join in.

Ghana, Zambia and Ethiopia are at various stages of the process, but debt experts say China’s agreement to provide financing assurances for Sri Lanka, a middle income country that was not eligible under the G20 framework, could provide fresh momentum for moving forward on those separate cases.

READ: Sri Lanka begins talks with China on refinancing debt

The statement said the debt roundtable participants agreed on the importance to urgently improve information sharing on macroeconomic projections and debt sustainability assessments in debt treatment cases.

It said the IMF and World Bank would rapidly issue staff guidance on data-sharing at each stage of the restructuring process, resolving a frustration voiced by China and other creditors about lack of sufficient information.

Participants also discussed the role of multilateral development banks (MDBs) in debt restructuring processes through their provision of “net positive flows” of concessional finance, and welcomed the implicit debt relief provided by the World Bank’s International Development Association arm through low interest or zero-interest loans and grants.

Participants agreed to organize a workshop in coming weeks on how to assess and enforce comparability of treatment of creditors, and said they would work on principles regarding cut-off dates, formal debt service suspension at the beginning of the process, treatment of arrears, and perimeter of debt to be restructured, including with regards to domestic debt.

“This work will also help in clarifying potential timetables to accelerate debt restructurings,” the statement said.

It said the IMF, World Bank and the G20 presidency will continue to work closely together and with other partners to further support the international response to current debt challenges.

Separately, Japanese Finance Minister Shunichi Suzuki said Japan, France and India will announce a new platform for creditors to coordinate restructuring of Sri Lanka’s debt, adding it would be “very nice” if China were to join the effort.

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