The World Bank would meet with the International Monetary Fund this week to deliberate on debt issues. The US Treasury Secretary considers debt revision a front burner. Meanwhile, senior members of the treasury reserve do not anticipate a finalized decision at the meeting.
IMF Debt Restructuring Scheme
On Monday, Kristalina Georgieva, IMF Managing Director, reiterated an ongoing debt restructuring program for Zambia and Chad. She expressed her wish for the project’s success by December. Thus, opening doors for other countries to request aid.
The Paris Club, alongside twenty other countries, created a Common Framework for debt relief in 2020. Its purpose was to scale struggling countries. But thus far, it has failed to actualize this motive.
Nearly sixty percent of the countries in the world are knee-deep in debt. Last week, Janet Yellen, US Treasury Secretary, called out China, Africa’s largest lender. She criticized China for tardiness in assisting countries.
Furthermore, she added that it was vital for the world’s bilateral lenders to expend efforts in restructuring.
Yellen gave a speech at a conference organized by the Center for Global Development. In her oration, she said China deferred debt treatment allocation to needy countries. Also, it has supplied treatments above borrowers’ sustainability power.
Meanwhile, China negated the slothfulness claim against it in Zambia’s case. It said that it played its part efficiently in restructuring the country’s debt.
A US Treasury representative informed reporters that Chad and Zambia’s case is progressing gradually. But they may not reach a compromise anytime soon.
Expanding The Debt Restructuring Program
Pierre-Olivier Gourinchas, IMF Chief Economist, implored countries in debt to solicit early assistance from world lenders. Then he admonished creditors to always come through for countries requesting help. He stated that soliciting counties demand an immediate response from global creditors.
In addition, he said now is the time to employ the Common Framework scheme. Thus, riding-off debt-induced miseries. He tagged China as a partial supporter of the G20 Common Framework.
He stated that China refused to support the program for middle-income nations. But it worked it out with low-income countries seamlessly.
Sri Lanka applied for the debt restructuring project. But helping Sri Lanka would involve a procedure with creditors outside the G20 program.
Last week, Yellen stated that some countries would require the debt relief program. So, she declared intentions to persuade other members to join in pushing the scheme.
Zambian authorities addressed investors concerning the delay in debt treatment. The officials said they wish to enter an agreement with creditors before the year ends.
Zambia was the first African country to fall back on its quota amid Covid. The country recorded a surge in debt rate. Its debt touched 133% of its Gross Domestic Product for the year.
A French finance source released updates on Chad’s situation concerning its debt relief application. It said the country is close to getting the help it needs.