EU calls on China to ‘live up to’ debt relief responsibilities, as burden rises in developing world

The European Union’s ambassador in Beijing says China should live up to its debt-relief responsibilities in the developing world

China, the developing world’s single largest creditor after the World Bank, has been criticised for a lack of transparency around its debt restructurings

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The European Union’s ambassador to China, Jorge Toledo Albinana, says Beijing must help ease the debt burden among developing countries. Photo: Handout

Published: 10:15pm, 17 Nov 2022Updated: 12:19am, 18 Nov 2022

The European Union’s (EU) ambassador to China has urged Beijing to help relieve the debt burden of the world’s least developed countries, which are increasingly vulnerable to energy and food crises exacerbated by the Russia-Ukraine war, a potential global recession and rapid strengthening of the US dollar as the country hikes rates.

In his first public speech since taking his post in September, Jorge Toledo Albinana said the world’s poorest countries face US$30 billion in debt repayments to official and private sector creditors this year, and there had been a “lack of progress in bringing key creditors around the table”.

“Not moving ahead with debt restructuring could burden those highly indebted low and middle-income countries with years of debt servicing problems, lower growth and underinvestment,” he told the Caixin Summit in Beijing on Thursday.

Some developing countries, such as Sri Lanka, are facing enormous financial distress following the economic shock of the coronavirus pandemic.

Criticism has been levelled at China, the developing world’s single largest creditor after the World Bank, by the international financial community for a lack of transparency around its debt restructurings, making it more difficult for other creditors to assess what level of support they may need to provide.

Albinana said positive results from the Group of 20 (G20) common framework for debt relief, which was initiated in 2020, have proven to be “elusive”.

At the G20 summit on the Indonesian island of Bali earlier this week, leaders expressed concern about the deteriorating debt situation in some vulnerable middle-income countries, saying this could be addressed by multilateral coordination involving all creditors.

“More than 40 per cent of [debt] is due to China, as the World Bank has found,” Albinana said. “With the US dollar appreciating and interest rates up, the debt burden has become even heavier.