A senior US Treasury official criticized China, the largest lender to developing economies, specifically, saying that the world’s creditors should move decisively and in concert to address the “generational challenge” of poorer countries grappling with untenable debt loads. 

No Trouble In Climate Goals

In a speech on Thursday, Jay Shambaugh, the undersecretary of the US Treasury for international affairs, outlined the US vision for international finance, which involves enlisting the help of both public and private creditors in addition to international financial institutions.

He stated that low- and middle-income nations who are dedicated to achieving ambitious economic and climate goals ought to have no trouble obtaining funding for initiatives without incurring financial hardship.

However, far too many of them are dealing with net negative cash flows, which occur when loan repayments exceed.

Shambaugh stated in the lecture at the Peterson Institute for International Economics in Washington that total net debt flows from Chinese creditors since 2019 have now turned negative for more than 40 of these countries.

Debt Issues In Developing Countries

Over the past two years, Shambaugh, who has lately led US-China negotiations on financial and economic matters, noted that the topic of debt distress has come up in every US-China interaction, including meetings with Treasury Secretary Janet Yellen.

Throughout his address, Shambaugh also urged international financial institutions to coordinate aid efforts and urged private lenders to help developing nations via net-positive finance.

“Especially at this very high-stakes moment in sustainable development, the entire international financial system can help low- and middle-income countries face the challenges they’re facing,” stated Shambaugh.

At a routine conference in Beijing on Friday, Mao Ning, a spokeswoman for the Chinese Foreign Ministry, responded to questions over Shambaugh’s remarks by saying that her country “attaches great importance to the debt issues of developing countries.”