Last week, Suriname reached an important step in trying to recover its economy. The International Monetary Fund (IMF) informed that it reached an agreement with the small South American country for the second review of a loan program, which, according to the Reuters agency, will make available US$ 53 million as soon as it is approved by the executive board of the bottom.
This agreement revives a program through which the IMF would allocate US$ 700 million to Suriname, but which had been paralyzed for over a year because the country did not meet the stipulated targets.
The IMF highlighted that the Surinamese government is renegotiating its debts with China and India in “good faith”, and it is at this point that the story begins to look like a fight between David and Goliath: the second largest economy in the world suffocated the small southern country -American, with around 600 thousand inhabitants, by making it difficult to renegotiate debts.
According to information from the Argentine website Infobae, China is the creditor of 17% of Suriname’s public debt. To get money from the IMF, the Surinamese government sought to restructure its debts, but the renegotiations with China were the only ones that did not advance.
This week, a report by Radio Joy, from Ghana, pointed out that the IMF issued a warning that the African country is “exposed” to the possibility of losing a significant part of its revenue, since the large loans it made with China are guaranteed by the production of commodities (such as cocoa, bauxite and oil).
Since the early 2000s, Ghana has borrowed nearly $5 billion in 41 Chinese loans for investments in areas such as transport, energy and agriculture. Now, it is going through its worst economic crisis in decades and faces great difficulties in paying its creditors.
The cases of Suriname and Ghana are not isolated: last year, the World Bank reported that China was the creditor of more than 40% of the debt that the poorest countries in the world owed to public and private institutions. And Beijing’s reluctance to renegotiate those debts has intensified crises around the world.
A report by Forbes pointed out that the New Silk Road program, through which China finances infrastructure projects around the world, is one of the main factors for the increase in the debt of poor countries with the Asian giant.
According to the American magazine, at the end of 2020, of the 97 countries for which data were available, all those with the highest debts to China were involved in the program, such as Pakistan (US$ 77.3 billion), Angola (US$ 36.3 billion), Ethiopia ($7.9 billion), Kenya ($7.4 billion) and Sri Lanka ($6.8 billion).
A survey released this month by the Associated Press agency pointed out that 12 poor countries (such as Pakistan, Kenya, Zambia, Laos and Mongolia) have China as a creditor of up to 50% of their foreign loans and most of them have already earmarked more than a third of its collection for the payment of the external debt.
In this way, the revenue to cover fundamental expenses, such as education and infrastructure, is increasingly compromised. Two of the countries on the AP list, Zambia and Sri Lanka, unable to pay even the interest on loans, announced defaults on their foreign debt payments, in 2020 and 2022, respectively.
In addition to its reluctance to renegotiate debts, China is secretive about how much money it borrows and on what terms, making it difficult for other major creditors to intervene. Beijing is also forcing borrowers to place money in hidden escrow accounts so that the Asian giant is at the head of the queue of creditors to be paid.
In a note sent to the AP, the Chinese government refuted the accusation that it refuses to renegotiate debts and claimed that it extended payment terms, granted emergency loans and was the biggest contributor to a program that temporarily suspended interest payments during the pandemic. of Covid-19.
However, this does not seem enough: last year, after the annual meeting of the IMF and the World Bank in Washington, the Secretary of the Treasury of the United States, Janet Yellen, said that developing countries have already been under pressure in recent years due to factors such as Soaring inflation, capital and currency flight, and China’s refusal to renegotiate debts add to this pressure.
“Really, the barrier preventing further progress has been a major creditor country, namely China,” said Yellen. “So there has been a lot of discussion about what we can do to get China to negotiate and promote a more effective solution.”
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