That failure of cooperation among creditors was a key theme at this past week’s Spring Meetings of the International Monetary Fund and World Bank. That included the so-called Global Sovereign Debt Roundtable, co-chaired by India, which was broadly tasked with hammering out a way forward for resolving debt treatment among all creditors.
The issues surrounding China’s role as a creditor were also highlighted this week when Japan, India and France announced that debt restructuring talks had begun on Sri Lanka without Beijing, a move people familiar with the situation said was intended to signal frustration and a dwindling of patience with its demands.
There were, however, some positive signs. China softened its insistence that multilateral lenders like the World Bank take haircuts, or losses, on their debt along with all other creditors. That came amid an apparent concession by the World Bank to boost ultra-low interest loans and grants to countries in debt distress.
“One should of course not underestimate the capacity of international finance officials to make process look like progress,” Martin Mühleisen, a nonresident senior fellow at the Atlantic Council’s GeoEconomics Center and a former IMF chief of staff, wrote in a commentary. “And it will be primarily up to China to demonstrate its willingness to help some of its poorest creditor countries back on its feet.”
Work via the debt roundtable is expected to continue with a workshop in May aimed at getting creditors to agree on how to fairly treat all debt, including held Chinese creditors, multilateral development institutions like the World Bank and private bond holders. Talks are expected to continue on the sidelines of the G-20 ministers meeting in Gandhinagar, India, in mid July.
“There is hope that as a creditor China will be coming on board and being at the table to discuss further,” she said. “China is very much present,” in the sovereign debt discussions.
When asked about China’s intentions on Friday, a foreign ministry spokesman in Beijing provided the details of what the country had proposed going into the debt roundtable, which was held on Wednesday, without offering any specifics on the meeting’s outcome.
Sri Lanka, its creditors and the IMF said they want China to participate in restructuring discussions. But people familiar with the talks said they are also eager not to let Beijing hold up negotiations any further.
Paris Club members including Japan account for $4.8 billion, or more than 10% of Sri Lanka’s external debt, according to IMF data. That’s slightly higher than China, which stands at $4.5 billion, while India is owed $1.8 billion.
The IMF approved a $3 billion four-year bailout for Sri Lanka last month and has urged a speedy resolution of debt-restructuring talks.
Bloomberg
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