Commentary
BEIJING – In its latest attempt to shirk responsibility for the debt crises of some low-income countries, Washington has slung mud at China as a main obstacle to providing relief for those who are struggling with debt.
The so-called “barrier” by US treasury Secretary Janet Yellen is no more than another vicious slander to distract attention and shift blame.
To set the record straight, the current debt pressure facing several developing countries has been caused and mounted by Western capital, not China. And those debt burdens have been accumulated over time.
According to the World Bank’s 2022 International Debt Statistics, 28.8 percent of Africa’s external debt comes from multilateral financial institutions and 41.8 percent from commercial creditors. All these put together account for nearly three quarters of Africa’s total debt.
Another example is Sri Lanka, a South Asian country that has been plagued by a financial crisis. Data from the country’s Department of External Resources showed that as of April 2021, the plurality of its foreign debt is owned by Western, particularly American, vulture funds and banks, which hold nearly half, at 47 percent.
At present, a wave of interest rate hikes by central banks in advanced economies – such as the US Federal Reserve – is contributing to a global economic slowdown and tighter financial conditions, leading to difficulties for emerging markets and developing countries, especially low-income developing countries, economists have said.
“Emerging markets are confronted with a multitude of risks from the strength of the US dollar, high external borrowing costs, stubbornly high inflation, volatile commodity markets, heightened uncertainty about the global economic outlook, and pressures from policy tightening in advanced economies,” the International Monetary Fund (IMF) said in its latest Global Financial Stability Report published earlier this month.
The Fed’s ongoing interest rate hikes are making things far worse.
A strong US dollar for countries with debt in US dollars makes the debt much harder to pay, said Daniel Leigh, who heads the World Economic Studies division in the IMF’s Research Department, adding that poorer countries are likely to bear the brunt.
IMF Managing Director Kristalina Georgieva also argued that emerging markets and developing countries are being hit by a stronger US dollar, high borrowing costs, and capital outflows – a triple blow particularly heavy for countries that are under a high level of debt.
Even Yellen herself also admitted that high inflation, tightening monetary policies, currency pressures and capital outflows have been increasing debt burdens in many developing countries.
“Irresponsible lending” once collapsed many developing economies in the 1980s. Back then, the “petrodollar boom” spurred US financial predators to invest overseas, many of which offered massive lending to Latin American countries. And when the US Federal Reserve started to raise fund rates in the 1980s, outflows of capital eventually led to the economic crises in those heavily-indebted countries in Latin America. Those history lessons should not be forgotten.
In the current crisis, China has always been a helper and problem solver. It has been supporting the move to ease African countries’ debt burden and actively implementing the G20 (Group of 20) Debt Service Suspension Initiative for Poorest Countries and has the highest deferral amount among G20 members.
China has signed agreements or reached common understanding on debt relief with 19 African countries, and engaged in the case-by-case debt treatment of Chad and Ethiopia under the G20 Common Framework.
The debt problems facing developing countries, in a nutshell, arise from the profit-seeking expansion of US-led Western capital and the worsening imbalance in the US dollar-dominated international financial system. China, far from being the main factor behind the trouble, has made great efforts to help others lighten their financial burden.
“Western leaders blame China for debt crises in Africa, but this is a distraction. The truth is their own banks, asset managers and oil traders are far more responsible but the G7 (Group of Seven) are letting them off the hook,” said Tim Jones, head of policy at the London-based charity Debt Justice, formerly Jubilee Debt Campaign.
Western governments have failed to take on companies in their own countries, Jones said, urging the United States and Britain to introduce legislation to compel private lenders to take part in debt relief.
The US side should be aware that amid the prolonged pandemic and growing geopolitical conflicts, the debt-induced spillover effects have been seriously hampering the global economic recovery, thereby deteriorating the global debt risks.
What debt-ridden countries need is effective international cooperation and concrete actions, not least from the United States and other developed countries, rather than mere lip service or hubristic self-righteous rhetoric.
– Xinhua
