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By Andrea Shalal
WASHINGTON (Reuters) -U.S. Treasury Secretary Janet Yellen views debt restructuring as a key priority, but senior Treasury officials said they do not expect any major breakthroughs on debt matters at this week’s meetings of the International Monetary Fund and World Bank.
IMF Managing Director Kristalina Georgieva said on Monday she hoped debt restructuring efforts for Zambia and Chad could be completed by the end of the year, which she said would pave the way for more countries to seek help.
The Group of 20 nations launched its Common Framework for debt relief in late 2020 together with the Paris Club to aid low-income countries, but it has failed to produce even one debt restructuring deal thus far, even though some 60% of those countries are in or near debt distress.
Yellen last week singled out China, the biggest creditor to many African countries, for dragging its heels, and said it was crucial for all the world’s major bilateral creditors to participate meaningfully in restructuring efforts.
“To date, China has delayed providing debt treatments to borrowers in debt distress or has provided treatments that fall short of restoring the borrower’s debt sustainability,” she said in a speech at the Center for Global Development.
China last month denied any foot-dragging in the case of Zambia’s debt, saying it has played a “positive role” in its restructuring.
A U.S. Treasury official told reporters there had been some incremental progress in the cases of Chad and Zambia, but agreements were unlikely in the next couple of days.
IMF chief economist Pierre-Olivier Gourinchas told reporters countries should seek help early from the global lender and their creditors, and urged quicker action on resolving the mounting debt problems faced by a growing number of countries.
“Progress towards orderly debt restructuring through the Group of 20’s Common Framework is urgently needed to avert a wave of sovereign debt crises. Time may soon run out,” he said.
China was also still blocking calls to expand the G20 debt reduction initiative to include middle income countries, the U.S. Treasury official said, but progress on individual cases was possible.
Aiding Sri Lanka, one of the most urgent such cases, would require a process with key creditors outside of the G20 framework, the Treasury official said.
Yellen, who last week warned that some countries would need “considerable debt relief,” would discuss the issue with her counterparts during the week, a second Treasury official said.
The Zambian government told investors on Friday it hoped it would agree debt relief terms with official creditors by the end of the year or early 2023.
Zambia was the first African country to default in the COVID-19 era as it struggled with debt that reached 133% of GDP at the end of 2021.
Chad’s creditors are also close to reaching a debt relief agreement, a French Finance Ministry source said on Monday.