USAID chief calls on China to restructure country’s debt

(AP):

The head of the US government aid agency called on China on Wednesday to help Sri Lanka and other nations that had borrowed heavily from Beijing with debt restructuring, not just with lines of credit and emergency loans.

Samantha Power, the administrator for the US Agency for International Development (USAID), contrasted India’s “critical” measures to aid Sri Lanka during its worst economic crisis with the two decades during which China offered “opaque loan deals at higher interest rates than other lenders” and financed infrastructure projects that often served little practical use.

“The biggest question of all is whether Beijing will restructure debt to the same extent as other bilateral creditors,” she said during a visit to India, warning that the crisis in Sri Lanka, albeit a result of different factors, wasn’t unique. Several countries in Africa and Asia were similarly hoping that their calls for restructuring debt would be answered.

“It is really essential that Beijing participate in debt relief transparently and on equitable terms with all other creditors,” Power said.

Sri Lanka is bankrupt and has suspended repayment on its US$51-billion foreign loans. The crisis has led to severe shortages of fuel, cooking gas and medicine, and long lines for essential supplies, which led to massive protests and the ouster of President Gotabaya Rajapaksa.

The government is in the process of preparing a debt-restructuring plan, a condition for a rescue package it is negotiating with the International Monetary Fund. China, which accounts for 10 per cent of Sri Lanka’s debt, has resisted offering a debt cut.

With climate shocks walloping the economies of nations already battered by the pandemic, and the war in Ukraine compounding global food and fuel shortages, Power pointed to the protests related to food and fuel prices in over a dozen countries as inflation soars.

“If history is any guide, we know that Sri Lanka’s government will likely not be the last to fall,” she said.

Power travelled in East Africa earlier this month to spotlight the hunger crisis in the region, where more than 50 million people are expected to face acute food insecurity this year. She said that millions of tons of grain and oil, crucial for bringing down global food prices, were blocked in Ukrainian seaports because of Russia’s February 24 invasion.

She said that “India’s voice and its diplomacy” was crucial in brokering the deal to clear the way for the grain to be exported from Ukraine. But with Russian missiles hitting Ukraine’s Black Sea port of Odessa hours after it was inked, she admitted that the deal was “very much hanging in the balance”.