US Asks India to Speed Up Debt Restructuring Efforts at G20, Slams China for ‘Lack of Cooperation’

The G20 Common Framework seeks to ensure better coordination and fair burden-sharing between Paris Club countries, which include advanced economies such as the US and France, and emerging global creditors, such as India and China, in providing debt relief to low and middle-income countries.

US Treasury Secretary Janet Yellen has called on India to ”accelerate global coordination on debt restructuring” as New Delhi gets ready to take over the presidency of the G20 after current chair Indonesia on December 1.

Addressing an event at the Microsoft office in New Delhi on Friday morning, Yellen said that the G20 Common Framework, conceived a couple of years ago in order to deal with post-COVID insolvency and liquidity problems in low and middle-income countries, had failed to live up to its expectations.

The US official accused China of “lack of cooperation” in the G20 Common Framework and stalling global debt relief efforts. Yellen noted that nearly 60 percent of low and middle-income countries are facing debt distress owing to COVID-related disruptions.

“As a consequence, debtor countries in need are hesitant to request Common Framework treatment. This needs to change. All major bilateral creditors, including China, must cooperate constructively to deliver on their G20 commitment to provide meaningful debt relief,” Yellen remarked.

Citing the case of Sri Lanka, which is in the throes of its worst economic crisis caused by depleting forex reserves and a balance of payments (BoP) crisis, Yellen said that it was crucial that Colombo gets “timely and orderly debt relief.”

The US Treasury secretary is currently visiting New Delhi to attend the US-India Economic and Financial Partnership (EFP) dialogue with Indian Finance Minister Nirmala Sitharaman, as per a statement by the Treasury Department.

Yellen and Sitharaman are also scheduled to participate in a fireside chat with executives from major Indian companies and American companies operating in India later in the day.

From New Delhi, Yellen will travel to Indonesia to attend the G20 Joint Finance and Health Ministers’ Meeting on November 12 and will also accompany President Joe Biden at the G20 Leaders’ Summit on November 15 and 16.

The US accuses China of not cooperating in global debt relief efforts for developing countries. But Beijing has repeatedly expressed concerns over “negative spillovers” of Western sanctions in terms of high energy and food prices in the wake of Moscow’s special military operation in Ukraine.

Beijing has also criticized Washington’s economic policy for exacerbating the debt crisis, in view of the US Federal Reserve raising interest rates on dollar-denominated bonds by 375 basis points this year.

The interest rate hikes by Washington have strengthened the value of the dollar vis-à-vis foreign currencies, leading to a surge in dollar-denominated debt and developing nations being forced to pay higher prices for imports.

Yellen Calls for Strengthening Supply Chain Resilience, Deeper Integration of US, Indian Economies

In her remarks in New Delhi, Yellen further called for “deeper integration” of the US and Indian economies in order to advance the “shared objectives” of peace and prosperity in the Indo-Pacific region.

She also said that the US would like to “minimize” supply chain disruptions through economic integration among Washington's major partners and allies in the region, noting that groupings such as the Quad (Australia, India, Japan, and the US) and the Indo-Pacific Economic Framework (IPEF) demonstrate Washington’s commitment to the region.

“The United States is pursuing an approach called ‘friendshoring’ to diversify away from countries that present geopolitical and security risks to our supply chain,” Yellen remarked.

The US official claimed that many countries in the region were already diversifying their supply chains to become less reliant on China against the backdrop of heightened geopolitical competition between the world’s two biggest economies and recent tensions caused by US House Speaker Nancy Pelosi’s visit to Taiwan in August.

“Technology companies like Amazon and Google are investing in India and Vietnam. Apple recently announced that it was shifting some iPhone manufacturing from China to India,” Yellen noted.