“I have told China to speed up debt restructuring for Ghana” – IMF Chief
The Managing Director of International Monetary Fund (IMF), Kristalina Georgieva said she told Chinese officials to speed up work towards reaching debt restructuring agreements for Ghana, Zambia and Ethiopia.
According to a report by Reuters, Kristalina made the appeal to China’s new top economic official, Li Qiang.
The report states that Georgieva, who met with Li and other top Chinese officials during a visit to China last month, said on Thursday she found Li very approachable and pragmatic.
The IMF chief said Li assured her that he wants China to play a constructive role in resolving debt relief cases.
Per the report by Reuters, at an event hosted by Meridian House and Politico, Kristalina stated, “The truth is, and I was … very straightforward on that, it takes far too long for that (debt) resolution.”
“Yes, China has multiple institutions that deal with that, that makes it complicated domestically, but they have to speed up their participation.
Ghana is currently discussing with China a proposed restructuring of Ghana’s external debt.
Ghana seeks to carry out a debt operation exercise on its external debt which China holds about $2 billion of it.
In a lot of debt negotiations taking place within the developing world, China is the crucial missing component. Although it is the largest bilateral lender in the world, it is opaque about its lending policies and how it renegotiates with distressed customers.
According to the World Bank, the planet’s poorest countries faced $35 billion in debt-service payments to official and private sector creditors in 2022, of which 40% was due to China alone.
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For Ghana, Chinese loans have been a reliable funding source for major projects since 2000; in two decades, Accra has racked up close to $5 billion from at least 41 Chinese loans. After several years of near-unbridled borrowing, Ghana is now debt-trapped and wading through its worst economic crisis in a generation, with a debt-to-GDP ratio exceeding 93% as of November 2022.
Africa’s self-styled Black Star managed to secure an IMF staff-level agreement in December 2022 for a $3 billion facility, but the final approval has been contingent on restructuring a $44 billion debt load, of which $29 billion (67%) is owed to foreign creditors.
The United States and other Western countries have faulted China for causing delays in setting up restructuring agreements for heavily indebted countries that have asked for help under the Common Framework set up by the Group of 20 major economies.
Georgieva noted China had been helpful in reaching a debt relief deal for Chad, and also Sri Lanka, a middle-income country that was not eligible for help under the G20 framework, and she encouraged China to show progress on other cases.
About 60% of low-income countries are already in or at risk of debt distress, and about 25% of emerging economies are at high risk and facing “default-like” borrowing spreads, Georgieva said.
Georgieva said that during her visit Chinese officials underscored their commitment to multilateralism, opening up China’s economy for more trade, and debt restructuring.
The IMF this week said rising geopolitical tensions and the resulting fragmentation of the global economy could increase financial stability risks, reducing cross-border investments, asset prices, payment systems and banks’ ability to lend.
The global lender has long warned of increased costs, economic friction and GDP output losses associated with the global economy’s fragmenting into geopolitical blocs, with U.S.-led democracies on one side and China and other autocratic states on another. Those concerns have been heightened since Russia’s invasion of Ukraine.
Georgieva said Chinese officials also worried about fragmentation, but their foremost concern was securing jobs at home, with a target of creating 12 million jobs this year.
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Source: ghananewsavenue.com with additional information from Reuters.com and myjoyonline.com
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