China is likely to abandon its demand that multilateral development banks share losses with other creditors during sovereign debt restructurings for impoverished countries, potentially removing a significant obstacle to debt relief, according to Reuters, citing a source knowledgeable about the plans.
This development is expected to be announced during a high-level sovereign debt roundtable on Wednesday, which will take place alongside the World Bank and International Monetary Fund (IMF) Spring meetings in Washington.
The source revealed on Tuesday that Beijing will no longer require multilateral lenders to take "haircuts" on loans provided to impoverished nations. In return, the IMF and World Bank have agreed to ensure that their debt sustainability analyses for countries undergoing debt restructuring are made available to Chinese authorities earlier in the process.
During an event at the meetings, IMF Managing Director Kristalina Georgieva confirmed that the Fund had agreed to provide earlier debt sustainability information to creditors, enabling them to better prepare for restructurings. She also stated that the World Bank was being asked to demonstrate how it could be a net positive provider of financing and concessional loans.
The IMF, World Bank, and U.S. Treasury have argued to Beijing that providing concessional loans to debt-distressed nations is equivalent to taking principal losses on loans. Georgieva expressed optimism about the ongoing discussions, hoping to maintain this outlook following the sovereign debt roundtable.
U.S. Treasury Secretary Janet Yellen also shared optimistic sentiments earlier, believing that China would agree on specific technical aspects of debt restructuring for impoverished nations. Charles Robertson, Global Chief Economist at Renaissance Capital, highlighted the significance of the agreement for emerging nations struggling with debt. He noted that if China is willing to accept the exemption for multilateral development banks, debt restructuring can happen more quickly.
The IMF, World Bank, and India, the current G20 president, are co-chairing the Global Sovereign Debt Roundtable to accelerate debt relief for countries in need. The co-chairs are expected to release a statement following Wednesday's meeting. U.S. officials and others have largely attributed ongoing delays in finalizing debt treatment agreements for countries like Zambia, Ghana, and Ethiopia to China's foot-dragging and reluctance from private-sector creditors.
