At the virtual meeting with countries that have a debt level considered unsustainable in view of economic growth forecasts and the ability to service the public debt, and which has worsened with the Covid-19 pandemic and the Ukraine/Russia conflict, countries were present creditors such as the United States, United Kingdom and Japan, as well as the International Financial Institute, the global association representing the financial industry and private creditors.
Sri Lanka, Ecuador and Suriname were also present, countries that also have a debt considered excessive according to the criteria of the IMF and the World Bank, which include indicators such as the debt-to-GDP ratio or the relationship between the value debt and tax revenue.
The Paris Club, a group of Western creditor nations, joined China, India and Saudi Arabia, with momentum from the IMF and World Bank, in April 2020 to agree on a roadmap, known as the Suspension of Service Initiative. Debt Control (DSSI), which suspended the payment of the debt of countries in greater difficulties due to the effects of the pandemic.
Faced with criticisms about the lack of participation of private creditors, which in practice meant that debt service continued to be paid despite the countries' financial difficulties, creditors defended the need to involve the private sector in the negotiation, in a model known as Common Framework beyond the DSSI.
The countries' resistance to adhering to this model is explained by the fact that adherence led to an immediate drop in the 'ratings' attributed by the financial rating agencies, which made access to the financial market more expensive and more difficult, precisely at the time when which countries most needed funding.
So far, only four countries have opened a formal restructuring process: Chad, Zambia, Ethiopia and Ghana, although analysts believe that more countries will need to restructure their public debt.
The meeting also focused on ensuring comparability of treatment between private and official creditors and on solving technical and legal problems that have made it impossible for the process to move forward, leaving countries with the burden of having joined a debt restructuring process, but without the benefits of restructuring.
China, criticized for the opacity of its loans, argues that the IMF and the World Bank should also suffer loan losses, but the two institutions have rejected this idea, arguing that it is impossible given the operational model in which they operate, which provides for the payment total loan amounts as a means of guaranteeing concessional lending capacity.
