US Treasury Chief Yellen Renews Pressure On China To Fix Zambia's Debt Crisis

US Treasury Secretary Janet Yellen renewed pressure on China on Thursday to help expedite the global effort to restructure Zambia's borrowings, instead of allegedly being focused on preserving its control as the largest lender to the debt-mired African state

WASHINGTON (UrduPoint News / Sputnik - 10th February, 2023) US Treasury Secretary Janet Yellen renewed pressure on China on Thursday to help expedite the global effort to restructure Zambia's borrowings, instead of allegedly being focused on preserving its control as the largest lender to the debt-mired African state.

Yellen, who had previously called on China to outrightly forgive its loan to Zambia, used a more diplomatic tone in urging Beijing to help the international effort in rectifying weaknesses in the Common Framework debt-restructuring process that has left Lusaka stuck and unable to develop its economy.

"China really needs to come to the table on this," Yellen said during a discussion on African debt hosted by the Washington-based Center for Strategic and International Studies. The US treasury chief bemoaned "China's lack of willingness to comprehensively participate and to move in a timely way" on Zambian debt.

The national debt of Zambia rose $2.7 billion, or 9.3%, year-on-year in 2022. The country is in severe debt distress and urgently needs deep and comprehensive debt treatment in line with the Joint WB-IMF Debt Sustainability Analysis that called for $8.4 billion in debt relief in 2022-2025 and additional relief through 2031.

Like other poor countries, Zambia borrowed heavily from Beijing and Western fund managers that snapped up its dollar-denominated bonds to build infrastructure and finance other government projects.

About one-third of Zambia's foreign debt is estimated to be in the hands of Chinese lenders.

World Bank President David Malpass said last month that China's actions in talks among countries that lent money to Zambia are delaying a restructuring of the African nation's debt, adding that Beijing needs to move on such unfeasible demands. "China is asking lots of questions in the creditors committees, and that causes delays, that strings out the process," Malpass said in an interview in late January.

Yellen, who visited Zambia last month, had urged the country's creditors to work quickly to restructure its debt, and accused China of obstructing a deal. The Chinese Embassy in Lusaka, Zambia's capital, responded by urging the United States to stop sabotaging unspecified sovereign nations' efforts to solve their debt issues.

The Zambian debt talks are a test case for how quickly and well sovereign debt restructuring can work in an era where developing countries have issued dollar bonds to private owners and� China has emerged as the largest sovereign lender.

In Zambia's case, talks have been slow, without any agreement reached on debt relief almost two years after the country decided to restructure its debt under the Common Framework.