China – the reluctant debt relief leader in a debt-distressed world

China carries much of the burden and blame in many cases of countries in extreme difficulties, the World Bank says

Beijing must go beyond short-term service relief and lead the way, whether it wants to or not, analyst says

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About 60 per cent of the world’s poorest countries are already at high risk of debt distress or already in distress, with China carrying much of the burden and blame in many cases, according to the World Bank. Photo: Shutterstock

Published: 2:18pm, 12 Dec 2022

When Covid-19 struck, the Group of 20 wealthiest nations came up with a debt relief initiative to help poor countries cope with the pandemic’s devastating fallout.

The Debt Service Suspension Initiative (DSSI), set up in May 2020, helped countries concentrate their resources on fighting the pandemic.

But the relief was temporary and the debt crisis has now worsened for some countries in Africa, Asia and Latin America.

As the biggest bilateral lender to many of these countries, China should step up and reduce the debt hanging over their economies, analysts say.

According to the World Bank, 60 per cent of the world’s poorest countries are already at high risk of debt distress or already in distress, with China carrying much of the burden and blame in many cases.

At the end of 2021, China was the largest bilateral creditor to World Bank’s International Development Association countries, accounting for US$100 billion of their bilateral debt stock, up from US$15 billion in 2010, World Bank president David Malpass said.

Malpass said China was expected to account for 66 per cent of the debt-service payments the countries would be making on their official bilateral debt.