Several countries have encountered financial problems in recent years. Interest rates have risen and as a result borrowing costs have risen, and at the same time the prices of things like food and fuel have risen sharply in recent years. Mainly because of the war in Ukraine. This concerns countries such as Zambia, Sri Lanka, Ghana and Ethiopia. They would benefit if their creditors canceled some of the debt.
But China doesn’t want that, unless the World Bank also claims more of its loans. This institution argues that this cannot be the case because it would lose its ability to respond to crises. The United States supports the World Bank, which China sees as an extension of American power in the world.
IMF and World Bank
Under the system agreed in 1944 at American Bretton Woods, the IMF and the World Bank are always at the forefront of loan repayments. They act as a lender of last resort, i.e. if no one else wants to give a country more money. In addition, they rely on their good credit standing to be able to borrow money cheaply so that they can borrow it again below the market interest rate.
Outgoing World Bank president David Malpass believes progress has been made at the G20 meeting in Bangalore, India. “We can build on areas we agree on and see what else we can do.” According to the American, the spring meetings of the IMF and the World Bank in April are a good moment to continue the talks.