By David Lauder and Karin Strawhecker – Increasing debt in emerging markets means that China, now the world’s largest official debtor, must begin to restructure debt as Paris Club lenders did in previous crises, CM World Bank, Carmen Reinhardt, at Reuters’ next conference on Tuesday.
“What do I think China All you have to do to deal with this is what other lenders have done, which you have to restructure. Restructure a lot with low interest rates, long-term terms, debt consolidation or some combination thereof, ”Reinhardt told the Economic Inequality Committee.
During the Govt-19 epidemic, China had to take on a “new role” that is the “old role” for Paris Club lenders, as Beijing is now facing, for the first time, widespread and problems with the ability of large-scale debt repayment countries.
China has signed a G20 debt suspension effort that would allow it to suspend official bilateral lending to fund 73 health programs in the world’s poorest countries, and has agreed to a new G20 debt restructuring framework.
“The real challenge is next, when we get to the point where we have to face real writing,” Reinhardt said.
Reinhardt, a Harvard economist who joined the World Bank in June 2020, has written extensively on the financial crisis. Last year, he co-authored an academic article on China’s debt abroad, showing that up to 50% of it was not reported to the World Bank or the International Monetary Fund.
World Bank President David Malpas warned that without more permanent debt relief, more people in developing countries would go into poverty and repeat the irregularities of the 1980s. He has been urging China for full participation in debt relief efforts, including loans from state-owned companies.
The default of emerging markets in Latin America and East Asia led to common debt cancellation efforts in the late 1980s, such as the Brady Project and the Highly Debt Poor Countries (HIPC) initiative in the 1990s.
When asked if another HIPC initiative was needed, Reinhardt said, “I do not think we have reached that level yet,” noting that the general G20 framework for debt restructuring would take a case-by-case approach.