G20 finance talks end with no debt relief deal

Disagreements hobbled prospects for progress on crucial debt restructuring talks held on the sidelines of the G20 finance chiefs meeting, highlighting the risks to poorer nations that are under severe financial stress.

"While there are still some disagreements, we now have the global sovereign debt roundtable with consideration of all public and private creditors," International Monetary Fund Managing Director, Kristalina Georgieva said on the sidelines of the Group of 20 meetings in Bengaluru, India.

Even though there was a commitment to find common ground for the benefit of the affected countries, there were little signs of any tangible progress. 

"We want to find a process in which everyone can put forward their concerns and positions on complicated topics," David Malpass, World Bank president, said in remarks to the roundtable Saturday.

The World Bank was listening to the concerns of the debt-ridden countries as well as those from China — a key creditor country that is at odds with the US and multilateral institutions over restructuring.

"We can build on areas where we agree, and we can explore what more we can do," Malpass added. "We're looking forward to the Spring Meetings to discuss this." 

Failure to strike an agreement between key creditors risks prolonging a deadlock that has stalled restructuring programs in countries like Zambia and Sri Lanka.

Saturday's roundtable of public and private creditors was organised to discuss the shortcomings of the Common Framework, a G20 initiative that brings together the Paris Club of traditional rich lender countries, private creditors and China to try to restructure the debts of low-income countries on a case-by-case basis. 

Rising debt risk in developing nations has been a key topic at the G20 gathering of finance chiefs wrapping up Saturday in Bengaluru, formerly known as Bangalore.

At the center of the standoffs in Zambia and Sri Lanka are Chinese demands that loans made by the World Bank and other multilateral lenders be included in any restructuring. That's partly driven by a Chinese view of those institutions as proxies for US power.

The US has rejected the idea, arguing any "haircut" would undermine those bodies' ability to respond to crises and make concessional loans.

Under the system agreed at the 1944 Bretton Woods conference, the World Bank and IMF are traditionally granted seniority in restructurings as lenders of last resort, which relies on their ability to raise low-cost capital to loan at below-market rates.

Malpass told the roundtable the debt situation in Ethiopia is different from Ghana and Zambia. He said Sri Lanka and other middle-income countries were also in need of quick debt restructuring.

"We should work together to achieve solutions – Zambia MoU, Ghana official creditors' committee, Ethiopia rescheduling, and Sri Lanka financial assurances. All of which can be done in the next few months if there is agreement at the table," he said.

Disclaimer: This article first appeared on Bloomberg, and is published by special syndication arrangement