Home Business framework As dominant creditor, China must ‘step up’ debt restructuring, Indrawati says in Indonesia

As dominant creditor, China must ‘step up’ debt restructuring, Indrawati says in Indonesia

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Indonesian Finance Minister Sri Mulyani Indrawati answers questions during an interview at the World Bank in Washington, U.S., April 22, 2022. REUTERS/Evelyn Hockstein

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WASHINGTON, April 22 (Reuters) – As the world’s biggest creditor, China needs to show leadership in addressing the growing debt problem facing many low-income and emerging countries around the world, the world’s leading economy told Reuters. the leader of the Group of 20 Finance Leaders this year.

Indonesian Finance Minister Sri Mulyani Indrawati, speaking in an interview on Friday, welcomed the news that China would join a creditors’ committee for Zambia, one of three countries that have requested debt relief. debt under the common G20 framework agreed with the Paris Club of official creditors.

Indrawati said there was still work to be done to move Zambia’s debt reduction process forward, and that other countries would also need debt relief and restructuring in the future.

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“There will be more cases to come,” Indrawati said. “At some point, China has to recognize that it has to step in to make that kind of leap and provide a platform for all creditors to discuss … how real this restructuring is going to be.”

International Monetary Fund Managing Director Kristalina Georgieva said on Thursday that China has pledged to join Zambia’s creditors’ committee following complaints from Zambia’s finance minister over delays in its debt restructuring. Read more

Zambia has become the first defaulter of the COVID-19 pandemic era in 2020 and is saddled with a debt burden of nearly $32 billion, or around 120% of its gross domestic product.

Georgieva, US Treasury Secretary Janet Yellen and others called for measures to speed up the debt restructuring process and make it more efficient.

Ethiopia and Chad also joined the Common Framework more than a year ago and have yet to receive debt relief.

China, which has become the world’s biggest creditor, has been reluctant to move forward with restructuring deals, according to Western officials.

Indrawati said G20 members made clear their concerns about the need to restart the slow process of debt restructuring at this week’s spring meetings of IMF and World Bank members, with around 60% of low-income countries currently at risk or at high risk. of over-indebtedness.

“After many discussions, especially on the role of China, they finally agreed to establish the creditors’ committee,” Indrawati said. “It’s progress.”

“Because they become very prominent and dominant, they also need to have ownership as well as leadership on how this type of situation should be resolved,” she added.

Indrawati said the Paris Club could provide a benchmark, but it was up to current creditors — including China — to agree on how to deal with countries that can no longer service their debts. She expressed optimism that G20 members would make progress in adjusting the Common Framework to become more effective during the year.

(This story corrects to remove superfluous word from first paragraph)

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Reporting by Andrea Shalal and David Lawder; Editing by Will Dunham

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