There's been a lot of talk about the potential global
debt crisis lately and particularly burden sharing between emerging and
developed economies. A common framework supported by the group
of 20 nations was meant to ease the process of
restructuring loans but getting all lenders to agree has not
been easy frustrating that creditors haven't gotten together and really
made progress on a restructuring. China is asking lots
of questions in the creditors committees that causes delays and
that's a big problem. More than half of the
world's low income countries are at or nearing a high
risk of debt distress. According to World Bank data
. The 75 poorest nations owe their creditors about$326
billion. At the end of 2021 Zambia and Sri
Lanka both defaulted and Ghana was on the cusp of
doing so. It's both parties to understand that this
is a situation where we need to restructure the debt
so that the debt then from there on that remains
on the books can be set regularly on time.
At the heart of the dispute is burden sharing with
china. Multilateral lenders and western nations And disagreement about
what debt relief actually means. China is the biggest
bilateral lender to developing and emerging countries with two thirds
of its financing targeted at infrastructure projects. Multilateral is
, on the other hand, focused Mainly on support
of health, education and other services. Nations like
the us have pushed for forgiveness of a certain amount
of debt. While China also a G-20 member wants
to extend the repayment schedules. The the problem is
the longer the process drags on, the more harm
it does to emerging economies. Government leaders, trying
to pull their finances out of a deep hole,
are having to decide why whether to support their struggling
populations or prioritize paying their creditors. And if the
impasse continues and obligations aren't met, combined with rising
interest rates and a stronger dollar, they risk being
further cut off from capital markets, which could lead
to deeper crises and potentially even unrest.