Opinion: West must take responsibility for debt crises in emerging economies
Published: Apr 19, 2022 12:04 AM
Photo taken on Sept. 18, 2019 shows US dollar banknotes in Washington D.C., the United States. US Federal Reserve on Wednesday lowered interest rates by 25 basis points amid growing risks and uncertainties stemming from trade tensions and a global economic slowdown, following a rate cut in July that was its first in more a decade. (Photo: Xinhua)
Photo: Xinhua

As central bankers and finance ministers from major economies are scheduled to attend a series of high-level meetings this week, including the World Bank-IMF Spring Meetings as well as the International Monetary and Financial Committee, Development Committee and G20 meetings, to discuss the state of the global economy, one looming disaster cannot be ignored: debt crises in emerging economies.

From Asia to Africa to South America, a growing number of developing nations are struggling to pay off their debt and facing serious economic hardship. In South Asia, after Sri Lanka defaulted on its foreign debt for the first time since its independence, Bangladesh is also feared to be headed for a similar crisis. In North Africa, Egypt and Tunisia are grappling with mounting pressure to pay off their record level debts. In Latin America, Argentina, Venezuela and other countries are also facing similar debt and economic crises.

Such a troubling trend has been in the making for some time since the outbreak of COVID-19. However, what might have pulled the last straw is the cascade of economic sanctions imposed by the West and led by the US against Russia. On top of the Russia-Ukraine conflict itself, the sanctions have seriously disrupted trade, pushing up food, energy and other prices, which hurt emerging economies that were already reeling from economic hardship brought about by the pandemic.

As the West continues to weaponize the global trade and financial system to punish Russia, little attention has been offered to the debt crises in numerous emerging economies, let alone the adverse impact of the sanctions on these struggling countries. In fact, Western countries refuse to take any responsibility for the damage of their reckless sanctions on the global economy and have sought to shift the blame onto China by singing the same old tune of the "China debt trap."

That is flat-out wrong. Many of the struggling emerging economies owe most of their debt to international lenders and rich Western countries, not China. In 2020, multilateral institutions and the "Paris Club" lenders of mostly Western governments held 58 percent of the external debt owed by 73 highly indebted poor nations, while China's share is 18 percent, according to the IMF.

The current debt troubles faced by emerging economies are serious and could have profound implications for the global economy as a whole. Yes, Western economies will also suffer if this spirals out of control and turns into a global debt crisis. No matter how powerful and rich they may be, they cannot live in a bubble comfortably watching others suffer. Therefore, it is in the interests of the West to take this problem seriously and try to work with the rest of the world to find a solution.

The first step in solving any problem is recognizing there is one. To help address the debt crises in emerging economies, the West, particularly the US, must first recognize the problem created by the sanctions and other toxic policies. This must be repeatedly stressed at this week's financial meetings in Washington and New York. The meetings cannot be hijacked by Western officials to push their ill-intentioned geopolitical gambits and force other countries to bow to pressure.

Make no mistake, Western officials will try everything at their disposal to use the meetings to talk about their anti-Russia obsession and their economic sanctions. They have already been talking about kicking Russia out of global multilateral platforms, including the G20.

That means officials from emerging economies, including China and India, must step up and ensure that due attention is given to the debt troubles in some developing nations. The West, led by the US, is trying to divide the global community and force countries to take sides. Well, it is time for emerging economies to take their own side and stand up for their own interests.

The debt troubles are severe but there are also initiatives and ways to tackle them. For example, the G20 economies have provided support through debt suspension and external debt restructuring to poor and developing countries. China is a leading advocate of such efforts and a major contributor in debt deferral programs to support emerging economies. The West must step up and take responsibility.

The author is a reporter with the Global Times.