US urges ‘decisive’ action on debt challenges in developing nations
WASHINGTON, United States — A senior US Treasury official urged Thursday for “decisive, coordinated actions” by creditors in tackling developing countries’ debt and development challenges —while also calling for more timely restructuring in certain cases.
“We have the tools to meet the moment, but we must strengthen and use them much more effectively,” said Treasury Under Secretary for International Affairs Jay Shambaugh during comments at the Peterson Institute for International Economics.
Low- and middle-income countries committed to “ambitious development and sustainability goals” should be able to access financing without grappling with debt distress, he said.
READ: Developing countries facing a debt crisis
But too often, financial flows are going out of such countries, with the burden of debt repayments exceeding fresh financing.
Shambaugh’s speech comes days before top financial leaders from around the world gather in Washington for the spring meetings of the International Monetary Fund and World Bank. Debt restructuring is expected to be a key issue during the meetings.
Vision for international finance
Laying out a vision for international finance, Shambaugh said official bilateral creditors should help sustain financial flows for borrower countries that are pushing forth reforms supported by the IMF and other multilateral lenders.
READ: China calls for ‘joint action’ in debt settlements at G20
But taking aim at China, he said that for more than 40 low- and middle-income countries, cumulative debt flows from Chinese creditors since 2019 has been negative.
“No individual creditors should be free-riding by pulling funds out of a country” while it is implementing reforms, while other creditors are refinancing or rolling over or injecting new resources, he said.
Shambaugh also called for help to developing countries with “significant market debt,” to sustain private flows at affordable terms.
Nearly 70 countries saw debt outflows to private creditors in 2022.
