China must show it can play by world debt-revamp rules, says IMF chief

CHINA, the biggest bilateral creditor to developing countries, needs to show it can operate within established international debt-relief processes for poor nations struggling to pay, the chief of the International Monetary Fund said. 

“China has been very slow to recognise that multilateral debt restructuring requires China to play by the rules that are already established,” Managing Director Kristalina Georgieva said in a Bloomberg Television interview with Tom Keene on Thursday (Apr 6). “Now is the time for China to demonstrate that they are capable of playing by these rules.” 

The Paris Club of mostly western traditional creditor nations joined with newer lenders China, India and Saudi Arabia in late 2020 to agree to a roadmap called the Common Framework to restructure debt from poor countries on a case-by-case basis. But the process has been plagued by delays, and Beijing has been reluctant to grant relief.  

Last month, Georgieva was in China, where she said the world urgently needs faster and more efficient processes for restructuring debts of vulnerable countries. 

While she said that China’s engagement in the Common Framework to reorganise debt and the Global Sovereign Debt Roundtable are “very much welcome,” a number of western nations including the US, the IMF’s largest shareholder, have accused Beijing of dragging its feet in providing relief. 

The issue is set to feature prominently at the IMF and World Bank Spring Meetings next week.

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China has prevented progress on debt talks for Zambia – which is participating in the Common Framework – with its call for loans from multilateral development banks and domestic creditors to be included in the country’s restructuring. The US and other countries have rejected such proposals.

“We have now initiated a debt restructuring for Zambia, and I got the assurances from the Chinese Premier that China would play its role,” Georgieva said. BLOOMBERG