Gabe Sterne is head of global emerging markets at Oxford Economics.
Stricken countries are suffering as China and the Western-dominated IMF engage in a titanic wrestling match over debt crisis-resolution architecture. It’s a massive problem that could be a destructive force for decades.
First, a recap on a main source of the deadlock. The IMF cannot lend to a crisis-afflicted government unless its debts are sustainable. So it needs financing assurances that creditors, including China, will provide debt relief. But China has dragged its feet in providing these assurances, and the IMF has refused to use its lending into official arrears framework to overcome China’s intransigence for fear of upsetting one of its major shareholders.
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