Thank you, Kristalina and Minister Sitharaman. Welcome everyone.
Resolving the sovereign debt problem is vital for development. It is in all our interest to achieve a faster debt restructuring process. I was involved in the Latin American debt restructurings of the 1980s. The delays in the process harmed both debtor countries and creditors. We know that the longer we wait, the worse the debt problem becomes. This hurts the repayment capacity of debtor countries and impacts global growth. Thus, we have an opportunity to create a win-win situation. It is in all our interest to achieve this.
The goal of these roundtable meetings is to have open discussions, help identify barriers to debt restructurings, and develop steps to improve the process. We want to find a process in which everyone can put forward their concerns and positions on complicated topics. We are listening to your concerns, and I noted the constructive remarks by the Deputy PBOC Governor at the G20 meeting yesterday that gave room to move forward.
We can build on areas where we agree, and we can explore what more we can do. We’re looking forward to the Spring Meetings to discuss this, so I hope more progress can be made by then through our deputies and technical meetings.
The World Bank is committed to providing net positive flows in a way that maximizes concessionality in the restructuring process. We will provide as much concessionality to the debt treatment as possible. The issues can be complex, and we will work with you on measuring concessionality and the comparable treatment among creditors and see how we can make progress on the debt treatment.
It’s clear that there should be a more predictable process that moves faster toward debt restructuring. The goal is to achieve sustainability of the debt. For some countries, liquidity support is enough, but many developing countries have unsustainable debt burdens that will need actual debt restructuring in order for the countries to grow sustainably in the future. If we only focus on liquidity solutions, we will end in repeated debt crises. This was one of the mistakes of the Latin American debt crisis, which lasted year after year because reschedulings were insufficient.
The World Bank is putting on the table to be as concessional as possible to achieve debt treatments by creditors. In the instance of Chad, which worked through the Common Framework, we have been providing 100% grants. The concessionality there has been massive. By providing resources, we are lowering the amount needed by creditors for restructuring, benefitting all the creditors. Some 70% of IDA resources go to Sub-Saharan Africa, many in unsustainable debt situations. Our concessionality is large here and directly benefits creditors during restructurings.
We need to find ways early on to engage debtors and commercial creditors in order to make progress. We take note that the situations differ among countries – Ethiopia is different from Ghana and Zambia. Sri Lanka and other middle-income countries are also under severe financial stress and need near-term debt restructurings in order to have an opportunity for more economic growth into the future. I urge everyone to try to make progress on each restructuring. We should work together to achieve solutions – Zambia MOU, Ghana official creditors’ committee, Ethiopia rescheduling, and Sri Lanka financial assurances. All of which can be done in the next few months if there is agreement at the table.