The rising influence of lending by China to developing nations is increasingly under the spotlight amid concerns the growing debt burden and onerous conditions could sow the seeds of a crisis.
The global development lenders, the International Monetary Fund and World Bank, are calling for more transparency about loan amounts and terms, and cautioning governments against relying too much on debt.
At the Spring meetings of the institutions on Thursday, newly-installed World Bank President David Malpass warned that “17 African countries are already at high risk of debt distress, and that number is just growing as the new contracts come in and aren’t sufficiently transparent.”
IMF Chief Christine Lagarde said the high debt levels and number of lenders, who do not all conform to international norms, also complicate any future efforts to restructure a country’s debt.
“Both the bank and the IMF are working together in order to bring about more transparency and be better able to identify debt out there, terms and conditions, volumes and maturities,” she said at a news briefing.
“We are constantly encouraging both borrowers and lenders to align as much as possible with the debt principles” set by international organizations such as the Paris Club and Group of 20.
An IMF report issued this week warned that rising debt levels around the world, government and corporate borrowing poses a risk to the global economy.
Lagarde said, “It’s clear that any debt restructuring programs going forward in the years to come will be more complicated than debt restructuring programs that were conducted 10 years ago, simply because of the multiplicity of lenders, and the fact that not all public debt is offered by members of the Paris Club.”