The annual International Monetary Fund (IMF) and World Bank spring meetings take place from April 8 to 14 in Washington. Regarding loans from China, the heads of both agencies called for greater transparency and warned governments not to overly rely on loans.
The new World Bank President, David Malpass, officially took office on April 9. At his first press conference on April 11, in response to the question of massive lending from China abroad, he said the keys are transparency and the quality of the projects.
“In China’s programs abroad, the importance of transparency of the debt, of the quality of the projects, the coordination with other donors,” said Malpass. “And the reason for that is because we want the borrowing countries to do well, to have good outcomes.”
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Debt Traps
Malpass served as the undersecretary of the U.S. Treasury Department and was officially elected as World Bank President on April 5. He has been concerned about China’s “One Belt, One Road” initiative, which has caused many countries to fall into debt traps. He warned that with a lack of transparency and quality, loans will only drag down economic growth.
“17 African countries are already at high risk of debt distress, and that number is just growing as the new contracts come in and aren’t sufficiently transparent,” said Malpass.
From Borrower to Lender
Malpass has been opposed to the World Bank’s loans to China. He said that China has transformed from a loan borrower to a lender, due to years of economic growth.
“It’s agreed that the borrowing by China would fall below a billion dollars by the end of the country program,” said Malpass.
He mentioned that the amount of World Bank loans to Chinese projects has already decreased.
At a briefing later on, IMF Managing Director Christine Lagarde said they are working together with the World Bank to bring about more loan transparency. This is also a request from the G20 summit.
“We are constantly encouraging both borrowers and lenders to align as much as possible with the debt principles that have been approved by the G20,” said Lagarde.
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