Western financial leaders said China is the main obstacle to efforts to restructure the mounting debt on developing nations caused by the global economic slowdown.
“The barrier to making greater progress is one important creditor country, namely China,” U.S. Treasury Secretary Janet Yellen said, speaking on Friday at the International Monetary Fund (IMF) and World Bank annual meeting in Washington.
Yellen said that high inflation, tightening monetary policies, currency pressures and capital outflows were increasing debt burdens in many developing countries, and more progress was urgently needed.
The world’s poorest countries face $35 billion in debt-service payments to official and private-sector creditors in 2022, with more than 40% of the total due to China, according to the World Bank.
China Not Participating
Spanish Finance Minister Nadia Calvino, who chairs the IMF’s steering committee, said there was increasing concern about China not participating, noting that Beijing had not sent officials to this week’s IMF and World Bank meetings.
“China is a necessary partner. It’s indispensable that we have them in the room and in the discussions when it comes to debt relief,” Calvino said, adding that many heavily indebted countries were also being hit hard by inflation and climate shocks.
German Finance Minister Christian Lindner joined the criticism, expressing his regret that China had not accepted his invitation to participate in the G7 roundtable with African countries.
China has argued it would not take part in some cases unless the IMF and World Bank also took a haircut.
Bringing China To The Table
Western nations launched a Common Framework in 2020 to bring creditors such as China and India to the negotiation table along with the IMF, Paris Club and private creditors.
Zambia, Chad and Ethiopia have applied to restructure under this new, yet-to-be tested mechanism. Sri Lanka is set to start talks with bilateral creditors including China after a $2.9 billion staff level agreement with the IMF under a similar platform.
The Paris Club reached out to China and India last month, seeking to coordinate on Sri Lanka’s debt talks, but are still awaiting a reply.
- Reuters with additional editing from Alfie Habershon
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