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US and UK financial entities join talks at new debt roundtable

REUTERS/James Lawler Duggan
World Bank president David Malpass said he hoped bringing the private sector into the process earlier would help speed up debt relief

US-based investment firm BlackRock is joining a new sovereign debt roundtable set up to accelerate progress on stalled relief efforts for distressed countries, with Britain’s Standard Chartered also joining, according to sources.

The Global Sovereign Debt Roundtable, chaired by the International Monetary Fund (IMF), the World Bank and India – this year’s leader of the Group of 20 major economies – held its first virtual meeting on Friday, a gathering aimed at setting the agenda for an in-person meeting on February 25 on the sidelines of a G20 finance leaders meeting in Bengaluru, India.

Friday’s meeting allowed deputies to share their views and prepare for next week’s meeting, said one source familiar with the matter. US treasury secretary Janet Yellen intends to press China and other creditors for faster progress on debt relief at the G20 finance leaders meeting.

“We welcome the global sovereign debt roundtable and look forward to engaging constructively in the dialogue alongside other key stakeholders,” a spokesperson for BlackRock told Reuters.

Three people with knowledge of the matter said Standard Chartered would also join. A spokesperson for Standard Chartered declined to comment.

Unlike the G20’s common framework platform for bilateral debt restructuring, the roundtable talks include public and private creditors as well as borrowing countries. Such setup aims at finding common ground on standards, principles and definitions for how to restructure debts of distressed countries, officials have said.

Participants include officials from creditor countries China, India, Saudi Arabia, the United States and other wealthy Group of Seven democracies, as well as six borrowing countries – Ethiopia, Zambia, Ghana, Sri Lanka, Suriname and Ecuador.

Burden sharing

World Bank president David Malpass, who helped organise the roundtable, said he hoped bringing the private sector into the process earlier – and facilitating its dialogue with China and other big creditors – would help speed up debt relief.

“To actually have debt relief that’s meaningful, there has to be a burden sharing among the various creditors,” Malpass told Reuters in an interview on Thursday.

Including financial institutions in the roundtable along with China, India and other bilateral creditors that are not part of the Paris Club marked a big step forward, he said.

Private-sector creditors now hold a much bigger share of the debt owed by developing and emerging market economies than official sovereign creditors, but have been largely absent from the Common Framework process.

Meanwhile, New York’s state legislature is weighing a measure that would compel private-sector creditors to participate in debt restructurings of low- and middle-income countries on the same terms as official government creditors, lawmakers and non-profit groups say. Some 52 percent of private-sector-held sovereign debt is under contract in New York state.

The World Bank’s International Debt Report showed that the external debt of the poorest countries nearly tripled to $1 trillion in 2021 from a decade earlier, and 60 percent of those countries were in or at risk of debt distress. Low- and middle-income countries owed 61 percent of their debt to private creditors.

China, now the largest official creditor, has been holding back to see how other bilateral and private creditors participate in debt reductions, or haircuts. At the end of 2021, China was the largest bilateral lender to the poorest countries, accounting for 49 percent of their bilateral debt stock, up from 18 percent in 2010, according to World Bank data.

“Private creditors are major players in many debt restructurings and need to share the responsibility for achieving a successful restructuring,” Malpass added.