US Treasury Secretary Janet Yellen said on Friday that high inflation, tighter monetary policy, currency pressures and capital outflows are increasing the debt burden in many developing countries, and that more progress is urgently needed.
He said he discussed the issue at dinner with African finance ministers and at many other sessions. Rich countries from the Group of Seven have also met with African finance ministers, who worry that a focus on the war in Ukraine is draining resources and attention from their pressing concerns.
“Everyone agrees that Russia should end its war in Ukraine, and that it will solve the most important problem facing Africa,” Yellen told reporters at Washington’s annual meeting of the International Monetary Fund and World Bank.
But he added that a more effective debt restructuring process was also needed, and China had a big role to play.
“Actually, the main obstacle to progress is the major creditor countries, namely China,” he said. “So there’s been a lot of discussion about what we can do to bring China to the negotiating table and push for a more effective solution.”
With China being the missing piece of the puzzle in a number of ongoing debt negotiations in emerging markets, the Group of 20 is launching in 2020 a joint framework to bring creditors such as China and India to the negotiating table with the IMF, Paris Club and private creditors.
Zambia, Chad and Ethiopia have asked to restructure under this new, untested mechanism. Sri Lanka is poised to start talks with bilateral creditors, including China, after striking a $2.9 billion deal with the IMF under a similar platform. Last month, Paris Club creditors reached out to China and India to coordinate talks on Sri Lanka’s debt, but they are still waiting for a response.
The world’s poorest countries will have to pay $35 billion in debt payments from official and private creditors by 2022, more than 40% of total debt to China, according to the World Bank.
Spanish Finance Minister Nadia Calvino, who chairs the IMF’s governing board, said in an interview with Reuters on Thursday that there was growing concern that China was not fully participating in debt relief efforts, noting that China had not sent officials to attend IMF and World bank meetings regularly. right away this week.
“China is a necessary partner. It is very important that it is present in the room and in discussions when it comes to debt relief,” Calvino said, adding that many indebted countries were also hit hard by inflation and weather shocks.
German Finance Minister Christian Lindner also joined growing criticism of China’s lack of timely involvement in restructuring the debt of low-income countries. China has argued that it will not participate in some cases unless the IMF and World Bank also take discounts.
Lindner told reporters that he regretted that China did not accept his invitation to participate in the G7 roundtable with African countries.
