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China will co-operate to resolve an impasse over developing countries’ sovereign debt restructurings, a senior official said, as Beijing appeared to soften its stance in fraught negotiations over a string of defaults.
China’s central bank governor Yi Gang on Thursday told G20 finance ministers in Washington that the country was willing to work through the group’s so-called Common Framework for sovereign debt restructuring.
“China is willing to work with all parties to implement the Common Framework for debt resolution,” Yi said in a statement released by the People’s Bank of China. The G20’s Common Framework seeks to bring the main bilateral creditors of countries with distressed debt together for negotiations. So far, Chad, Ethiopia and Zambia have signed up to take part.
Sovereign debt distress among developing countries has been a focus of this year’s IMF and World Bank meetings in Washington, as the pandemic and inflation have hit the ability of governments to service foreign borrowings.
China has insisted that multilateral lenders, which include western-led institutions such as the World Bank and the IMF, should break with norms and participate directly in sovereign debt restructurings to share some of the pain.
But advanced countries and others oppose the move, arguing multilateral institutions must retain their “preferred” status as “super-senior” creditors that are exempt from restructurings.
They argue this privileged status is the basis of multilateral institutions’ high ratings and is fundamental to their ability to provide low-cost funding.
Western countries have blamed China’s stance for holding up crucial debt restructurings for countries such as Zambia, which is waiting for the next tranche of a $1.3bn IMF package.
The PBoC’s Yi did not provide further details on China’s stance in his statement on the Thursday meeting.
But in recent days, US officials have sounded more positive on a breakthrough in the impasse with China, though they have said it remains unclear if Beijing is really willing to join the Common Framework.
Japan is leading efforts with India and France on a new initiative to discuss the restructuring of Sri Lanka’s debt, amid differences with China’s approach to resolving the issue.
In a news conference following the G20 meeting, Shunichi Suzuki, Japan’s finance minister, called on China, Sri Lanka’s biggest bilateral lender, to participate in the new platform, but it remained unclear whether Beijing would play along with other creditors.
“Through the co-operation of all parties involved, we hope that we can reach an early deal on debt restructuring,” Suzuki said.
On its website, China’s central bank said Yi had met multiple central bank governors this week including those of Zambia and Sri Lanka.
IMF data from the end of February indicates that nine countries, which aside from Zambia and Sri Lanka include Mozambique and Grenada, are in “debt distress”, while another 27 countries are at “high risk” and 26 more are on a watchlist.
Additional reporting by William Langley in Hong Kong and James Politi in Washington
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