Kristalina Georgieva, the Managing Director of the International Monetary Fund (IMF), has disclosed that she will travel to Zambia in two weeks’ time for the new global sovereign debt roundtable that will include China, other creditors, and some borrowing countries to meet for the first time next month on the sidelines of a Group of 20 finance officials meeting in India.
The Bulgarian economist, who has pushed hard for quicker movement on debt relief, expressed her belief that the African country would become the second nation after Chad to complete a debt treatment process under the Common Framework.
Georgieva, the first person from an emerging market economy to head the International Monetary Fund, told reporters that debt relief is critical for heavily indebted nations to avoid cuts in social services and other repercussions.
Georgieva acknowledged that reforms are needed, noting that Ghana was debating whether to seek relief under the G20 Common Framework, but remained concerned about how that process would work and how soon a debt treatment could be agreed upon.
The IMF Managing Director indicated that the new roundtable would not be a substitute for the Common Framework, but would seek to work on transparency, the timing of debt treatments, how to set cut-off dates for loans to be considered, and other issues that were not fully resolved. “The main objective of the roundtable is to bring everybody around the table at the most senior levels,” she said.
It was not yet clear which borrowing countries would participate, Georgieva added, but the intention was to invite G20 members who were also borrowers since the inaugural meeting would take place in India at next month’s meeting of G20 finance officials. “Additional meetings were expected in April at the spring meetings of the IMF and World Bank,” she said.
Georgieva first discussed the new roundtable last month after a visit to China, noting it would also include private sector creditors and multilateral institutions such as the IMF and World Bank.
The IMF estimates that 60% of low-income countries are in or near debt distress, along with some middle-income countries, but Georgieva said she did not believe the world was facing a systemic debt crisis with contagion risks.
Greater Willingness in Beijing
Georgieva averred she was seeing greater willingness in Beijing– now the world’s largest sovereign creditor to accept rescheduling of debt or interest rate changes, although officials there remained skeptical about actual debt reductions. “Of course, it is much better if debt reduction is done upfront, not through a reprofiling but with a … haircut,” she said, adding the IMF is continuing discussions with China as a lender about the value of having countries actually being able to service their debts.
The framework was set up by the Group of 20 major economies and the Paris Club of official creditors in October 2020 to help countries weather the COVID crisis, but it has been plagued by long delays.
U.S. Treasury Secretary, Janet Yellen, and other Group of Seven have grown increasingly frustrated about what they see as foot-dragging by China in moving forward on debt treatments for countries seeking help. China, for its part, argues that multilateral institutions should also be required to accept reductions in the debt they are owed.
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