Aid to poorest countries could benefit Chinese creditors, worries Yellen

US Treasury Secretary Janet Yellen expressed concern on Thursday that Chinese creditors could take advantage of international financial aid to poor countries.

“We would be very worried to see the resources provided to these countries, used to repay the debt to China, which would go against the objective of the programs.”, she said during a hearing before a committee of the House of Representatives. China is notably the first creditor of African countries, whose debt has exploded since the pandemic. A moratorium has given some air to the most indebted countries, and the next step would be to write off some of the debts.

The G20 has succeeded in convincing China and private creditors to take part in future debt renegotiations. “We have spoken with China about their participation, they have promised to participate as equal partners in the framework” of these discussions on debt, said Finance Minister Joe Biden.

However, she lamented, “There are gagging entities in China which lend and which have not fully participated in these efforts”. “We are concerned about this and we have spoken to the Chinese about it”, she added, also evoking the necessary transparency which is “An important way to ensure that funds are not embezzled“. China launched the “New Silk Roads” in 2013, which aims to build infrastructure abroad and increase its influence there.

Debt of poor countries

Janet Yellen also pleaded with the US Congress for the release of funds to help poor countries with this debt. International financial institutions have “Need additional support, in particular because the United States has not always contributed to the height of the promises”. “We have over $ 2.7 billion in unfulfilled commitments (…), and that will increase unless Congress allocates funds to meet our commitments.”, she said. “The pandemic has wreaked havoc on the finances of these countries, and if they are to rebuild themselves, many will have to improve their situation in the face of their debt. The United States were the first to create ” these programs, “But we must now finance (them)”, she pleaded.

Through the G20, the World Bank and the International Monetary Fund (IMF) launched in the spring of 2020 the Debt Service Suspension Initiative (DSSI) for dozens of low-income countries, which expires at the end. of the year.

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