G20 leaders see debt problems worsening in some middle-income countries

WASHINGTON (Reuters) – Leaders of major G20 economies will express concern about the “deteriorating debt situation” facing some vulnerable middle-income countries and call for a swift response from all official and private creditors to deal with the debt ask.

A draft statement from the G20 leaders, seen by Reuters, contained stronger language on the debt issue and acknowledged that the problem goes far beyond the poorest countries.

The draft stresses the importance of all official and private creditors participating in debt relief and bearing a fair burden. But it made no mention of China, which has been criticized by Western countries and international financial institutions for delaying debt restructuring efforts.

According to the draft, the leaders said they would step up efforts to implement a common framework for debt management in a “predictable, timely, orderly and coordinated manner”.

The framework was created in late 2020 by the G20 and the Paris Club of official creditors to help low-income countries survive the COVID-19 crisis. However, the outcome proved elusive, with only three countries – Chad, Zambia and Ethiopia – formally applying for debt treatment under the framework.

The G20 leaders also welcomed the debt deal reached by Chadian creditors and encouraged timely completion of the Zambian debt settlement in early 2023. They also encouraged completion of Ethiopia’s debt treatment under an IMF-backed program.

IMF and World Bank leaders, as well as officials from the United States and other Western powers, have been pushing unsuccessfully to expand the G20 framework to include vulnerable middle-income countries, but the effort has been thwarted by China, which is now the world’s largest largest sovereign creditor country.

The draft declaration, for the first time, acknowledged the seriousness of the debt problems facing middle-income countries, which experts said made explicit reference to Sri Lanka, which struck a staff-level agreement with the IMF in early September but required input from countries including China and Japan. Multiple creditors are there to obtain financing guarantees to ensure payment.

(Reporting by Andrea Shalal; Editing by Angus MacSwan and Chizu Nomiyama)