IMF chief to visit Zambia

International Monetary Fund chief Kristalina Georgieva will visit Zambia later this month.

Georgieva on Thursday said she would visit Zambia the week after next.

She also announced that a new global sovereign debt “roundtable” that will include China, other creditors and some borrowing countries will meet for the first time next month on the sidelines of a Group of 20 finance officials meeting in India.

Georgieva will travel to Africa after speaking at the World Economic Forum in Davos, Switzerland this week.

Georgieva, the first person from an emerging market economy to head the International Monetary Fund, told reporters debt relief was critical for heavily indebted nations to avoid cuts in social services and other repercussions.

The Bulgarian economist, who has pushed hard for quicker movement on debt relief, said she would travel to Zambia in two weeks, and hoped the African country would become the second nation after Chad to complete a debt treatment process under the Common Framework.

The framework was set up by the Group of 20 major economies and the Paris Club of official creditors in October 2020 to help countries weather the COVID crisis, but it has been plagued by long delays.

U.S. Treasury Secretary Janet Yellen and other Group of Seven have grown increasingly frustrated about what they see as foot-dragging by China in moving forward on debt treatments for countries seeking help.

China, for its part, argues that multilateral institutions should also required to accept reductions in the debt they are owed.

Georgieva said reforms were needed, noting that Ghana was debating whether to seek relief under the G20 Common Framework, but remained concerned about how that process would work and how soon a debt treatment could be agreed.

She said the new roundtable would not substitute for the Common Framework, but would seek to work on transparency, timing of debt treatments, how to set cutoff dates for loans to be considered, and other issues that were not fully resolved.

“The main objective of the roundtable … (is to) bring everybody around the table at the most senior levels,” she said.

“So we had the Common Framework and as it happens, it was this week that it delivered to the fullest, Chad. I’m going to Zambia next week, no, next week, the week after. I really hope Zambia would be the second case. And we know that Ghana is debating whether they should go to the Common Framework. What is the one issue they are concerned about, than anyone is concerned about? Speed and predictability. If we ask for it, do we know how it would work? Do we know what would be the timeline for debt resolution? We have no intention to substitute for the Common Framework,” she said.

She added, “We actually think this roundtable can help the Common Framework by thinking through some of the issues that are still not fully resolved. For example, how do we define a cutoff date for loans to not be considered in restructuring? What is the timeline? From the moment a request is made until a resolution is reached? What is the transparency requirement for the process? This roundtable can help, but the main objective of the roundtable. it is very commonsensical. Bring everybody around the table to discuss these issues at the most senior level. At the ministerial level, at the head of agency level, at the level of private finance CEOs.”

“And in terms of who would participate of the debtor countries, we don’t yet have a full definition of participation. We are going to certainly invite that the countries that are G20 members because our intention is to aim for first meeting of the roundtable at the margins of the G20 finance ministers, central bank governors meeting. But this is this first meeting is also a preliminary meeting. It is for us to come together and reach some common understanding of what we aim to achieve. And then the intention is to have meetings of the roundtable at the margins of Spring meetings and Annual meetings.”

It was not yet clear which borrowing countries would participate, Georgieva added, but the intention was to invite G20 members who were also borrowers, since the inaugural meeting would take place in India at next month’s meeting of G20 finance officials.

Georgieva first discussed the new roundtable last month after a visit to China, noting it would also include private sector creditors and multilateral institutions such as the IMF and World Bank.

The IMF estimates that 60% of low-income countries are in or near debt distress, along with some middle-income countries, but Georgieva said she did not believe the world was facing a systemic debt crisis with contagion risks.

She said she was seeing greater willingness in Beijing – now the world’s largest sovereign creditor – to accept rescheduling of debt or interest rate changes, although officials there remained skeptical about actual debt reductions.

“Of course it is much better if debt reduction is done upfront, not through a reprofiling but with a … haircut,” she said, adding the IMF was continuing discussions with China as lender about the value of having countries actually being able to service their debts.