UPDATE 1-White House official urges China, private sector to step up global debt relief

(New everywhere, add details, background and comments from the official)

By Andrea Shalal

WASHINGTON, June 30 (Reuters) – Major G20 economies are expected to revitalize the freeze on official bilateral debt payments from poorer countries to include middle-income countries and expand participation from China and the private sector, said Wednesday an official of the White House.

G7 and G20 US Sherpa Daleep Singh said China is by far the largest official bilateral creditor and should step up participation in the G20 Debt Service Suspension Initiative (DSSI) , but that more private sector involvement was also needed.

In April, the Group of 20 agreed to extend until the end of 2021 the debt freeze offered to the poorest countries to help them fight the COVID-19 pandemic and mitigate its economic impact, but did not failed to extend it to middle-income countries, leaving out 22 of the 72 countries considered to be at high risk of debt distress.

The initiative falls short of its original goals, with some countries reluctant to request a freeze on debt payments for fear of ruining their credit ratings.

“We need every country, especially the biggest lenders, to do their part,” Singh said at an online event hosted by the Center for Strategic and International Studies.

“Much of China’s lending activity is very opaque, and it self-classifies a lot of lending as commercial, even though it is very clearly government-led,” he said. declared.

Singh said it was also important to strengthen incentives for the private sector to shoulder the burden of debt relief for low- and middle-income countries.

“Public support from international institutions should not be used to reimburse the private sector, and I think the private sector needs to internalize the reality that investing in emerging markets is not a free meal,” he said. declared.

The White House official also said it was important to “remove the stigma” that heavily indebted countries face if they seek to restructure their debt burden more deeply, which is necessary in many cases. to create space for structural reforms.

So far, only three countries – Ethiopia, Chad and Zambia – have called for more in-depth debt restructuring within a common framework agreed to by G20 countries and the Paris Club of official bilateral lenders.

G20 finance officials will discuss the looming debt crisis in developing countries and emerging markets when they meet in Venice on July 9-10.

Emerging market debt levels hit a record high of over $ 86 trillion in the first quarter, according to the Institute of International Finance. (Reporting by Andrea Shalal; additional reporting by David Lawder; Editing by David Gregorio)

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