Ajay Banga arrived in Beijing on Wednesday for the latest stop in his worldwide job interview to become the next president of the World Bank.
Banga is scheduled to meet with Chinese Finance Minister Liu Kun, various leaders from the People’s Bank of China, along with Jin Liqun, head of the Asian Infrastructure Investment Bank.
More than any other stop on his tour so far, his talks in the Chinese capital will be key, given the current stand-off between the Chinese government and multilateral development banks (MDBs) like the World Bank and the IMF over whether these institutions should also take losses on their loans to poor countries.
China insists that all creditors, including the MDBs, should take equal “haircuts” on their loans even though both the IMF and the World Bank have flatly rejected the idea.
Zambia, more than any other country, has been hardest hit by the standoff between China and the MDBs, prompting outgoing World Bank President David Malpass on Tuesday to renew his appeal for creditors to settle their differences.
Meantime, Banga’s arrival in Beijing comes just two days before IMF Managing Director Kristalina Georgieva will also land in the Chinese capital for a week of events and meetings with many of the same finance officials.
Sri Lanka, Ghana Caught in the Crossfire
- SRI LANKA: President Ranil Wickremesinghe called on China and his country’s other major creditors to settle their differences or risk further pain for his beleaguered country. “There’ll be a lot of shadow boxing but, other than that, at the end of the day, neither side can afford to take a very rigid stance,” Wickremesinghe said. “There has to be compromise.” (FINANCIAL TIMES)
- GHANA: A delegation led by Finance Minister Ken Ofori–Atta is in China this week for talks with the China Exim Bank and other creditors to restructure $1.7 billion of debt. Despite the challenges that other countries have faced in getting China to align with other major creditors for debt relief, Deputy Finance Minister Abena Osei-Asare said he remains optimistic they’ll reach a deal in Beijing that will pave the way for an IMF package by the end of the month. (CITI NEWSROOM)
No one outside of China’s core policymaking community appears to know precisely what Beijing is hoping to gain from the prolonged fight with the MDBs, but a clue emerged over the weekend in an article published in the Communist Party-run tabloid Global Times.
China, the paper said quoting officials, wants to establish “a new international financial governance system along the Belt and Road Initiative.” So, the current duel with the IMF and World Bank over loans may be part of a larger effort to weaken those institutions just enough to give China’s own development finance agencies more room to operate in their new BRI ecosystem.
WHY IS THIS IMPORTANT? Banga is in a very difficult position where he has to reconcile the demands of the people in Washington who put him in this position with powerful actors in China who are actively pushing to change the system. What’s important to remember, though, is that countless people in Zambia, Ghana, Pakistan and elsewhere are caught in the middle.
SUGGESTED READING:
- Bloomberg: China Wants the World Bank to Offer Debt Relief to Zambia by Tom Hancock
- Global Times: All countries should be alert for financial risks amid high rates: official by Ma Jingjing
