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Third world owes China big time - World Bank seeks debt forgiveness

CHINA, the world's largest official creditor, needs to restructure debt as Paris Club lenders rescheduled loans in past crises, because of financial distress in emerging markets, said World Bank chief economist Carmen Reinhart

24 January 2021 - 19:00
CHINA, the world's largest official creditor, needs to restructure debt as Paris Club lenders rescheduled loans in past crises, because of financial distress in emerging markets, said World Bank chief economist Carmen Reinhart.

'What I think China will need to do is to restructure, either lower interest rates, longer maturities, or write-off in principal or some combination of that,' she said, Reuters reported.



Ms Reinhart said that during the Covid crisis, China would need to take on a 'new role' that has been an 'old role' for Paris Club lenders, as Beijing is now facing for the first time wider spreads and difficulties in countries' ability to service debt on a broad scale.



China has signed up to a G20 debt suspension initiative that allows up to 73 of the world's poorest countries to halt payments on official bilateral debts to help fund critical health initiatives, and it has agreed to a further G20 debt restructuring framework. 'The real challenge is next, when we move to the stage where you have real write-downs to contend with,' said Ms Reinhart.


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