Failure to cut debt burden of some countries could hamper growth, spark conflict
Yellen told reporters traveling with her in Africa that she and other US officials had gone through “many details of this over-indebtedness situation” during her meeting with Chinese Vice Premier Liu He. in Zurich on Tuesday.
She said she believed Chinese officials understood the imperative to reduce the debts of some of these countries, but declined to predict what China would ultimately do, and when.
Yellen, long a critic of the pace of China’s debt relief efforts for Zambia and other countries, on Friday again called on China and other countries to provide “timely debt relief”. , “comprehensive” and “significant in helping countries regain their position.”
Yellen said US officials have expressed specific concerns about Zambia, whose debt restructuring effort under the Common Framework of the Group of 20 has taken much longer to resolve than expected. Yellen will visit Zambia next week.
“It is important for the entire world that we do not allow low-income countries to slide into economic disorder,” Yellen said, noting that the goal of raising living standards in Africa enjoyed bipartisan support in the United States .
Failure to act results in negative spillovers, including conflict, fragility, war, terrorism and migration, she said, while draining resources that hinder a country’s ability to grow and move forward, Yellen said.
“Until it can take that burden at least partially off its back … it’s just stymied indefinitely in terms of what it’s able to do and achieve for its citizens,” she said. Partial debt relief allows a country to invest and grow and repay some of the reduced debt, she said.
Lenders get less if a country “falls into economic chaos” than if it could invest and grow, she said.
“I definitely think they get what the problem is, and that there needs to be a solution,” she said of her discussions with officials from China, which is now the world’s largest bilateral creditor. “Our counterparts are sophisticated economics officers who can listen to a reasoned argument and understand.”
US officials have also discussed with their Chinese counterparts Washington does not agree that multilateral development banks should not have to take a haircut along with sovereign lenders – an argument that Beijing often raises.
“This needs to be worked on, but we have counterparts that we can talk to reasonably and work through our differences. And I hope that some progress will emerge from that process, But I don’t make any predictions for you.”
(Reporting by Andrea Shalal; editing by Diane Craft)