India’s G-20 Sherpa, Amitabh Kant, has called on China to take a “haircut” on its loans to poor countries, stating that the country needs to be transparent about its debt and find a way to settle it. In a rare and direct reference to Chinese debt, Kant has urged China to openly declare its debt and support the economic recovery of developing nations.
While the US has previously taken the lead in criticizing China’s “debt trap diplomacy”, India’s call for action represents a new and welcome change in the approach to the issue. As developing nations struggle to recover from the economic impacts of the COVID-19 pandemic, it is essential that larger nations provide support and assistance where possible.
In particular, China’s lending practices have come under scrutiny in recent years, with many poorer countries finding themselves burdened by unsustainable levels of debt. In many cases, China has used infrastructure development projects to extend loans to countries, resulting in significant debt that can take years to pay off.
“China needs to come out openly and say what their debt is and how to settle it,” said Amitabh Kant, the sherpa for India during its presidency of the G20 this year. “It can’t be that the International Monetary Fund takes a haircut and it goes to settle Chinese debt. How is that possible? Everybody has to take a haircut.”
About 60% of low-income countries are already in or at high risk of debt distress, according to IMF data. That makes it essential to get China, the biggest bilateral lender to developing countries, to join international efforts to provide financial rescue to these nations. It is with this sense of urgency that the IMF, World Bank and India plan to host an inaugural meeting on global debt issues Friday.
Mr Kant’s remarks assume significance ahead of a scheduled virtual meeting of the Global Sovereign Debt Roundtable organized by the International Monetary Fund (IMF), the World Bank and India, which is leading the Group of 20 major economies this year. The virtual roundtable on February 17 will be followed by an in-person meeting in Bengaluru on February 25.
Kant’s call for China to take a “haircut” on its loans reflects a growing concern among many developing nations that the burden of debt is becoming unsustainable. As India’s G-20 Sherpa, Kant is in a unique position to advocate for greater transparency and accountability in global lending practices.
It is clear that the world is facing unprecedented challenges in the wake of the COVID-19 pandemic, and developing nations are particularly vulnerable to economic instability. In this context, it is vital that larger nations take responsibility for supporting the economic recovery of their neighbors, and that lending practices are transparent and sustainable.
By calling on China to take a haircut on its loans and to provide greater transparency about its lending practices, Kant is sending a message that developing nations must be supported in their efforts to recover from the pandemic. It is now up to the international community to take action and ensure that all nations are able to build a more sustainable and resilient future for themselves and their citizens.
