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World Bank President David Malpass called for a debt resolution process to restructure debt burdens on developing economies.
Malpass expressed his concerns about a lack of transparency over how many developing nations owe to China, on Bloomberg Television’s Surveillance Tuesday.
“The world needs to have a resolution process for debt that’s more robust than we have right now and starts earlier. There needs to be a change. The world was set up under the old debt composition, where China wasn’t a big player,” he told Bloomberg.
China is one of the world's largest single creditor nations. BBC reported that its loans to lower and middle-income countries have tripled over the past decade, reaching $170 billion by the end of 2020.
China’s lending liaisons
Research by AidData, an international development body at William & Mary University in the US showed that there were more than 40 low and middle-income countries whose debt exposure to Chinese lenders is more than 10% of the size of their annual economic output (GDP).
Djibouti, Laos, Zambia, and Kyrgyzstan have debts to China equivalent to at least 20% of their annual GDP.
Much of the debt owed to China relates to large infrastructure projects like roads, railways, and ports, and also to the mining and energy industry, under President Xi Jinping's Belt and Road Initiative.
Malpass said that it wasn’t “all transparent as far as what the amounts are” that is owed to China. Official government-to-government lending, excluding private-sector bank credit and other categories points out that 65% of the total amount was owed to China.
The World Bank chief told Bloomberg that “we’re working to avoid” the circumstance where assistance for developing nations is passed on to China in the form of debt servicing. “But the system has been one where -- that has allowed transparency to go down and down,” he added.
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With inputs from Bloomberg, BBC, and AidData