The Africa Confidential Blog
Rare China-US cooperation could end logjam on debt deals
The expectation that China will drop its longstanding demand for multilateral lenders, including the World Bank and IMF, to share losses alongside other creditors in sovereign debt restructurings for poor countries, is one of the main breakthroughs of the 10-16 April Spring Meetings. In return, the World Bank would provide new concessional financing to countries that have defaulted. And together with the IMF, it would ensure that their debt sustainability analyses of countries undergoing restructurings will be made available to China's authorities earlier in the process.
The proposals emerged in a special session in Washington DC on 12 April attended by governor of the People's Bank of China Yi Gang, United States Treasury Secretary Janet Yellen, IMF Managing Director Kristalina Georgieva, and outgoing World Bank President David Malpass. The agreement should speed up debt restructurings in Zambia, Ethiopia, and Ghana and dampen some of the geo-political rivalry that has been blocking progress on a new debt relief programme.
Yet much more has to be done to forestall a worsening debt avalanche, according to a new report from Boston University. Up to US$500 billion in debt owed by 61 nations – nearly 30 of them in Africa – at greatest risk of default should be written off to avoid 'cascading defaults', it reports. This would require a flexibility from creditors far beyond what is currently under consideration.