China to drop demand for development bank debt restructuring losses -source

China is expected to give up on their demand of multilateral development banks to share losses alongside other creditors for sovereign debt restructurings in poor countries. A confidential source states that this move will remove a significant obstacle to providing debt relief.

The news of this breakthrough on debt restructuring is expected to be confirmed at a roundtable on the issue of sovereign debt on April 7, which is taking place on the sidelines of the World Bank and International Monetary Fund Spring meetings in Washington.

The source adds that Beijing would no longer demand that multilateral lenders take “haircuts” on loans allocated to poor countries. Meanwhile, the International Monetary Fund (IMF) and World Bank have agreed to make their debt sustainability analyses of nations undergoing debt restructurings available to Chinese authorities earlier in the process.

At a Bretton Woods Committee event, IMF Managing Director Kristalina Georgieva reflected positivity about a potential agreement, stating that “I’m so far optimistic. I hope to remain optimistic after tomorrow when we are meeting”. She confirmed that a meeting on April 3 between deputies leading up to the roundtable had gone well.

Furthermore, U.S. Treasury Secretary Janet Yellen had at the start of the meetings expressed encouragement over China’s willingness to provide assurances about certain technical aspects of debt restructuring for distressed countries.

The potential agreement is significant for emerging nations grappling with debt, as it could quicken and streamline the process of restructuring, through the exemption of multilateral development banks. Access to debt sustainability information is also significant for China, as it gives them more influence and power over determining what the debt restructuring ends up looking like.

China will be present at the roundtable in Washington on April 7. Yellen stated that she would continue to urge Beijing to improve the Group of 20 Common Framework, which was designed to offer debt relief for low-income countries.

The IMF, World Bank and India, current president of the G20, are co-chairing the Global Sovereign Debt Roundtable, with its co-chairs expected to give a statement at the conclusion of the meeting.

It is likely that a significant amount of time will be spent discussing debt restructurings of Zambia, Ghana, and Ethiopia, which have yet to be finalized due to what U.S. officials and others hazard is China’s inertia as the largest bilateral creditor, and the lack of enthusiasm for the initiative from private-sector creditors.

(Reporting by David Lawder and Andrea Shalal. Additional reporting by Libby George in London. Editing by Paul Simao, Lisa Shumaker, Anna Driver and Alexander Smith)

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