Calls growing for reform of global finance architecture amid debt woes

Some of the world’s largest economies ramped up calls to increase support to troubled emerging countries ahead of a Group of 20 finance chiefs meeting."We need to work together to ease the debt overhang that is holding back too many countries,” US Treasury Secretary Janet Yellen said on Thursday. Yellen said she would push for all bilateral official creditors, including China, to participate in debt restructuring for developing countries in distress.Rising debt distress in a slew of emerging economies forms the backdrop at the gathering of world’s most influential economies in India’s southern city of Bengaluru. France and Indonesia also urged reforms to the global financial architecture in a bid to quickly help developing nations facing painful debt restructuring talks after the pandemic ravaged their economies."The international financial architecture must be reformed to ensure greater solidarity for developing countries,” Bruno Le Maire, France’s minister for economy and finance, told India’s Economic Times in an interview published on Thursday.While the developed nations encouraged the G20 to step up efforts to resolve the debt crises, Indonesia’s Finance Minister Sri Mulyani Indrawati said creditor nations must make progress on restructuring."Traditional creditors like the Paris Club, as well as new creditors like China, need to step in and start to discuss as these countries need fiscal space to serve the debt, which is at the cost of their own survival,” Indrawati said on the sidelines of G20 meetings.About 60% of low-income countries are already in or at high risk of debt distress, according to International Monetary Fund data. Debt worries of South Asian economies such as Pakistan, Sri Lanka and Bangladesh are particularly in the spotlight as world officials gather in the region.Efforts to negotiate sovereign-debt restructuring in countries such as Zambia and Sri Lanka have stalled as Washington and Beijing disagree on the way forward, leaving those economies in a destructive limbo."Most urgent is the need to provide debt treatment to Zambia, and to commit to specific and credible financing assurances for Sri Lanka,” Yellen told a press conference. "It’s important for China to co-operate.”The meetings in Bengaluru, formerly known as Bangalore, focus on reforming the global financial architecture amid rising debt repayment problems. Many are racing against time to restructure debt and discussions have turned political, with the US, India and other lenders from the Paris Club pressuring China to take a haircut on loans to poor nations.China, on the other hand, is offering to extend the repayment schedule and wants loans made by the World Bank and other multilateral lenders included in any restructuring. That’s partly driven by a Chinese view of those institutions as proxies for US power.Spain’s Economy Minister Nadia Calvino said the role of multilateral lenders like the World Bank should not be undermined and urged key global creditors to contribute to debt relief efforts."We need to find a balance and the right approach that provides relief without weakening the common safety net,” Calvino told Bloomberg Television in an interview.