Treasury Secretary Janet L. Yellen on Sunday called on international creditors to accelerate their efforts to provide debt relief to defaulting developing countries, arguing that supporting their deteriorating finances would benefit the global economy.
Speaking in India’s Gandhinagar ahead of a meeting of finance ministers from the Group of 20 countries, Ms Yellen cited a recent agreement between international creditors, including China, to help Zambia pay off its debts. She said the agreement, negotiated for more than a year, should be a blueprint to help other countries, such as Ghana and Sri Lanka, accelerate debt relief and restore growth.
“We should apply the common principles we agreed on in the case of Zambia to other cases instead of starting from scratch,” Ms Yellen said. “And we have to go faster.”
The finance minister noted that more than half of low-income countries are in or close to debt distress – a doubling from 2015. These countries face a vicious cycle, as high government debts make it difficult to balance public and private attract investment.
“If these countries develop and contribute to the global economy, we all benefit,” Ms Yellen said.
Last month, Zambia’s government hailed a deal that secured a three-year deferral of $6.3 billion in debt, most of it owed to Chinese lenders. That paved the way for the IMF to release $188 million in relief funds as part of a $1.3 billion rescue package. The settlement only came after a year and a half of difficult negotiations that left Zambia’s finances in a precarious state.
Ms Yellen said she would urge her G20 counterparts to accelerate efforts to enable poor countries to restructure their debts and provide borrowers with greater clarity on how the restructuring should work.
Her trip to India comes less than a week after she returned from Beijing, where she met with senior Chinese officials on how to stabilize relations between the United States and China.
Debt aside, finance ministers are expected to discuss international efforts to modernize the World Bank and other regional development banks.
Finance ministers are expected to continue discussing international support for Ukraine, a controversial topic within the G20. Russia is a member of the group and several countries, including India, have tried to remain neutral in the conflict.
In her remarks on Sunday, Ms Yellen made it clear that the United States and its Western allies have no intention of scaling back support to Ukraine.
“Our coalition’s support for Ukraine is unequivocal,” Ms Yellen said. “The United States will support Ukraine for as long as it takes. And I know the allies and partners in our coalition will too.”
