President of the World Bank David Malpass has accused China of delaying the debt restructuring process for Zambia.
And Mr. Malpaas has called for a new process for restructuring debt burdens for developing nations amid concerns about a lack of transparency over how much they owe to China.
Mr. Malpass said on Bloomberg Television’s Surveillance Tuesday that it is important for China to get on board for Zambia’s debt talks to move forward.
He said it is in China’s interests to have an improved system, given the prominence of their lending, and noted that Beijing is interested in participating.
“But the system has been one where — that has allowed transparency to go down and down.”
“In many cases, there are non-disclosure clauses in the debt contracts that leave it unclear” that payments are being made “often times to China,” Mr. Malpass said.
“The devil is in the details.”
Mr. Malpass noted that China remains outside of the Paris Club, the main institution where debt-restructuring talks occur.
The Group of 20 is making “some progress” in trying to broaden that out, he said.
G-20 finance chiefs were scheduled to meet later Wednesday.
Among the issues Malpass listed was some countries delaying addressing debt problems until a point of crisis, such as — in the case of Sri Lanka — the need to pay for food.
There’s also an imbalance between what the poorest countries are expected to pay — some $35 billion of debt service this year alone — versus the fresh foreign-aid flows that are coming in, Malpass said.
Among the issues discussed at the Wednesday IMFC session was a call for China to convene a creditors’ committee for Zambia.
“That would be a very helpful step” given how Zambia stopped paying creditors about a year ago, but lacks any pathway to debt resolution now, Mr. Malpass said.
“The world needs to have a resolution process for debt that’s more robust than we have right now and starts earlier,.”
“There really needs to be a change,” he said. “The world was set up under the old debt composition, where China wasn’t a big player,” he said.
The International Monetary and Financial Committee, the main steering panel of the IMF’s member countries, “heavily” discussed the subject of debt resolution at a session on Wednesday morning, Mr. Malpass said.
The meeting is one of a slew that are part of the spring meetings of the World Bank and International Monetary Fund this week in Washington.
“It’s not all transparent as far as what the amounts are” that are owed to China, Mr. Malpass said.
As far as official, government-to-government lending goes — a category that excludes categories such as private-sector bank credit — China now makes up 65% of the total, Mr. Malpass said.
The World Bank chief said “we’re working to avoid” the circumstance where assistance being sent to developing nations simply gets onpassed to China in the form of debt servicing.