A proposal under discussion this week will see the World Bank provide fresh low-interest loans, known as “concessional lending” and other grants to countries on the verge of default in exchange for China dropping a key demand and agreeing on a timeline for debt relief.
BEIJING: China and the World Bank are exploring compromises over how to restructure billions of dollars of debt held by poor nations, seeking a long-sought breakthrough that could unlock desperately needed aid.
Discussions yesterday in Washington, during the World Bank and International Monetary Fund’s Spring Meetings, were aimed at ending a deadlock among the world’s biggest creditor nations on how to renegotiate the debt of several poorer nations, which had become unsustainable amid surging inflation and a strong US dollar.
A proposal under discussion this week will see the World Bank provide fresh low-interest loans, known as “concessional lending” and other grants to countries on the verge of default in exchange for China dropping a key demand and agreeing on a timeline for debt relief.
The talks were described as ongoing, and the outcome is still uncertain, according to people familiar with the matter, who asked not to be identified because the discussions are private.
Key to the compromise is the World Bank increasing its emergency assistance to countries in debt distress, something its outgoing president, David Malpass, said on Tuesday that the lender was already intending to do.
Officials from a number of countries cautioned, however, that a major breakthrough is unlikely this week, that China’s position remains unclear, and that the discussions are focused largely on the overall process.
The standoff over debt restructuring and the role of development institutions has played into the larger dispute between China and the United States, particularly when engaging with developing economies where they’re both seeking influence.
The People’s Bank of China (PBoC) governor Yi Gang is the highest-level official expected from Beijing to attend the talks this week, along with deputy governor Xuan Changneng, according to a person familiar with the matter.
Finance Minister Liu Kun didn’t travel to Washington, with Beijing opting to send Vice-Minister Wang Dongwei instead, said a second person.
The World Bank and US Treasury Department declined to comment, while the PBoC and International Monetary Fund (IMF) didn’t immediately respond to requests for comment. — Bloomberg
