U.S. urges China to step up response to rising world debt risks

(Bloomberg) – A senior U.S. Treasury official urges China – by far the world’s largest bilateral official Creditor countries – Participate in coordinated debt relief for fragile states to avoid a systemic sovereign debt crisis. “Failure to act on these debts could mean years of indebtedness, underinvestment and low- and middle-income Continued difficulties in slowing growth in income countries,” 200 Brent Neiman, adviser to U.S. Treasury Secretary Janet Yellen, during a discussion Tuesday hosted by the Peterson Institute for International Economics Say. While China is not the only creditor country that “rejects quick and effective” help, it lacks participation in international coordination Debt relief “is the most common and the most important,” he said. China has been criticized for lending to poorer countries, nearly accounting for Percentage of bilateral and private creditor debt This year the world’s poorest countries need services, according to the World Bank. It helped secure the most recent debt relief deal, participating in the group’s moratorium on repayments during the pandemic. about25% of low-income countries are at high risk or already in debt distress, with about % of emerging market countries are borrowing and spending money to deal with the pandemic triggered by Russia’s invasion of Ukraine and the subsequent food and energy shocks, according to the International Monetary Fund. Bad Debt Soaring inflation has led to a series of rate hikes by central banks around the world, led by aggressive moves by the Federal Reserve, which have boosted the dollar. At the same time, developing countries have amassed $25 trillion in bad debt that threatens to create a historic string of defaults. Estimates for the total stock of official Chinese loans outstanding range from approximately $44 billion to one trillion dollars, concentrated in low- and middle-income countries, Nieman said. Up to 17 The country now owes more than to lenders in China as a percentage of its gross domestic product after accounting for on- and off-balance sheet liabilities, he said. G7 finance ministers called on China in May to urge creditor nations to help developing countries struggling with debt. In August, China said it would forgive 10 Towards

Interest free loan available African countries and redirect $ Billion Dollar International IMF reserves to the countries of the continent. But a study by Boston University’s Center for Global Development Policy estimates that the latest relief amount will be in 10 million and $60 million – or roughly 1% of what the continent owes China. It said it was difficult to pinpoint exact numbers due to a lack of publicly available information. Debt burden increases after the December maturity 60 by G- The so-called Debt Servicing Suspension Initiative passed Suspension or modification of debt repayments for low-income earners during Covid- Pandemic. Generic Framework G- has also set up a so-called common framework, bringing together the Paris Club of traditionally rich debtor countries and China to try to restructure the debts of low-income countries on a case-by-case basis. Chad, Ethiopia and Zambia are the only three common framework cases so far, and a delayed resolution means “pain and uncertainty that may deter others from requesting all needed treatment and ruled out the best outcome,” Niemann said. August, Zambia was awarded the Board of Directors of the International Monetary Fund Approved, providing a $1.3 billion support package, a major step in the country’s restructuring of debt and boosting the economy for a common framework. “Now that the IMF’s Zambia plan has been approved, creditors must act quickly to resolve the issue and then meet transparently, terms of debt handling ,”He says. to scale up high-quality development finance through multilateral development banks – by expanding their existing resources and using them to mobilize private capital — will be “a major focus of the Treasury Department at the annual meetings of the International Monetary Fund and World Bank in Washington in October,” said Niemann. (Updated with more comments from Nieman at Article.)

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