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The Chinese government has recently made changes to its framework for assessing the debt sustainability of countries involved in the Belt and Road Initiative. These alterations come after the Belt and Road Forum held this week. One key adjustment is the tightening of criteria for evaluating the economic growth of debtor nations. Additionally, positive evaluations from multilateral development financial institutions like the International Monetary Fund (IMF) and the World Bank have been removed from the assessment process.
To ensure a more thorough evaluation of growth risks, the time period for making macroeconomic forecasts has been reduced to 10 years. This cautionary approach will be adopted by financial institutions in China and other countries participating in the Belt and Road Initiative.
Furthermore, the eligibility criteria for inclusion in the framework have been expanded. Previously restricted to low-income Belt and Road Initiative (BRI) countries, it now includes “BRI market entry countries,” which encompass middle-income nations like Sri Lanka.
China, as the world’s largest bilateral creditor, has demanded that multilateral development banks share debt sustainability analyses of countries seeking debt restructuring if they wish to receive debt relief from China.
According to data from the World Bank, China’s loans to low- and middle-income countries amounted to $170 billion at the end of 2020.
Notably, the previous statement expressing appreciation for the efforts made by the IMF, the World Bank, and other international organizations to improve the debt sustainability of low-income countries has been omitted.
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The Chinese government has revised the framework for assessing the debt sustainability of countries participating in the Belt and Road Initiative. Picture taken in Beijing on October 18, 2023 (Reuters/Edgar Su)
BEIJING (Reuters) – The Chinese government has revised its framework for assessing the debt sustainability of countries participating in the Belt and Road Initiative. It has tightened the criteria for evaluating the economic growth of debtor countries, and removed positive evaluations from multilateral development financial institutions such as the International Monetary Fund (IMF) and the World Bank which said they “welcomed the efforts”.
The revised framework was announced after the Belt and Road Forum held this week. The period in which financial institutions in China and other countries participating in the Belt and Road Initiative are encouraged to make macroeconomic forecasts will be halved to 10 years. This allows for a more careful approach when assessing growth risks.
Furthermore, eligibility for the framework has been expanded not only to low-income BRI (One Belt, One Road) countries but also to “BRI market entry countries.” This will include “middle-income countries”. like Sri Lanka.
China, the world’s largest bilateral creditor, has demanded that multilateral development banks share debt sustainability analyzes of countries seeking debt restructuring if they expect debt relief from China.
According to World Bank data, China’s loans to low- and middle-income countries were worth $170 billion at the end of 2020.
Meanwhile, the text that was previously included has been deleted: “We welcome the efforts of the IMF, the World Bank, and other international organizations to improve the debt sustainability of low-income countries.”
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