The United Nations have warned developing nations against lending loans from China, the major concerns that growing debt burdens could sow the seeds of a crisis.
The global development lenders, the International Monetary Fund and World Bank, are calling for more transparency about loan amounts and terms, and cautioning governments against relying too much on debt.
At the spring meetings of the institutions on Thursday, newly-installed World Bank President David Malpass warned that “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.”
IMF chief Christine Lagarde said the high debt levels and number of lenders, who do not all conform to international norms, also complicate any future efforts to restructure a country’s debt.
“Both the bank and the IMF are working together in order to bring about more transparency and be better able to identify debt out there, terms and conditions, volumes and maturities,” she said at a news briefing.
“We are constantly encouraging both borrowers and lenders to align as much as possible with the debt principles” set by international organizations such as the Paris Club and Group of 20.
An IMF report issued this week warned that rising debt levels around the world — government and corporate borrowing — poses a risk to the global economy.
China has been lending throughout the developing world as part of its “belt and road” initiative, especially focusing on resource-rich nations.