The US Treasury Department on Thursday cautioned emerging official creditors against curtailing loans to nations already engaged in programs with the International Monetary Fund (IMF) or multilateral development banks. China has been the world's biggest creditor since 2017.
US Treasury Warns Creditors Against Withdrawing Loans from Countries Engaged With IMF
Speaking at a Peterson Institute for International Economics event, Treasury Undersecretary Jay Shambaugh emphasized the importance of solidarity among creditors in supporting countries undergoing reforms.
"When the IMF and MDBs support countries' reforms and investment plans, Fund shareholders should not be withdrawing their own financing," Shambaugh said as Reuters reported.
"No individual creditors should be free-riding by pulling funds out of a country while it is implementing IMF- and MDB-supported reforms, and other bilateral and multilateral creditors are refinancing or rolling over funds, or injecting new resources," he added.
He also stressed the need for decisive action to address the financial challenges faced by low- and middle-income nations, urging coordinated efforts to expedite debt relief. Shambaugh highlighted the concerning tradeoffs that many developing countries face due to declining funds inflows amid rising debt service payments.
He underscored the necessity for measures to enable these nations to access private funds on favorable terms without offsetting support from international financial institutions. Shambaugh's remarks reflect widespread frustration over China's slow pace in debt restructuring efforts and debt relief deals.
READ NEXT : Former Trump Administration's US Treasury Secretary Wants to Buy TikTok And Remove Its 'Algorithm'
US Treasury on Sovereign Debt Issues
While sovereign debt issues were a key focus of recent discussions between US and Chinese officials, concrete solutions are yet to be reached, according to Reuters.
Shambaugh urged official bilateral creditors to maintain positive net flows to countries pursuing responsible policies, particularly when endorsed by the IMF and MDBs.
He also advocated for the G20 Common Framework reforms to ensure more effective and timely debt restructurings. Additionally, he emphasized the importance of encouraging private sector engagement in developing countries and creating mechanisms for voluntary relief from private debt distress.
Join the Conversation