China’s backing for global debt transparency crucial to contain Covid-induced stress in emerging markets
- A global consensus must be developed around disclosure requirements for all sovereign lending, says Bretton Woods Committee
- China is the largest creditor to emerging-market countries, where debt has been accelerating rapidly in recent years
Bringing China on board is “critical” to promoting transparency in sovereign lending, according to a report by the Bretton Woods Committee, amid a rise in sovereign debt distress in emerging markets caused by the Covid-19 pandemic.
The influential US-based non-profit group recommended in a report on Monday that a global consensus be developed around “minimum voluntary disclosure requirements” and ongoing reporting obligations for all sovereign lending.
“As part of that consensus-building process, bringing in China, the largest lender to the emerging markets and a member of the G20, to ensure its support and engagement,” said the report, titled “Debt Transparency: The Essential Starting Point for Successful Reform”.
“In particular, China, as the largest single lender to the emerging markets, will be critical in determining whether the current system can be made more transparent.”
Emerging markets have been accumulating debt rapidly in recent years. Zambia became Africa’s first coronavirus-era sovereign default after it missed payment of a US$42.5 million on one of its dollar-denominated sovereign bonds in November 2020, raising concerns more low-income nations may struggle with debt repayment during the pandemic.