IMF: US, China Reaffirm Commitment to Tackling Global Debt Crisis

In a rare display of cooperation amid ongoing geopolitical and trade tensions, senior officials from the United States and China will join a high-level roundtable on sovereign debt restructuring this Wednesday, signaling a shared commitment to addressing the ballooning debt burdens facing developing nations.

According to the International Monetary Fund (IMF), the continued engagement of the world’s two largest economies in the Global Sovereign Debt Roundtable reflects their recognition of the urgent need to improve debt transparency and accelerate restructuring processes for low- and middle-income countries.

“The fact that U.S. Treasury Secretary Scott Bessent will be at the table tomorrow, and that China is also participating, demonstrates a real and continued commitment to this dialogue,” said Ceyla Pazarbasioglu, Director of the IMF’s Strategy, Policy, and Review Department, speaking on the sidelines of the IMF and World Bank Annual Meetings in Marrakech.

Launched in 2023, the roundtable has helped streamline restructuring negotiations for sovereign bondholders and official creditors. But significant challenges remain, particularly with non-bonded loans, such as opaque bilateral lending and private bank loans.

“Transparency is a shared concern,” Pazarbasioglu noted. “Everyone wants to see more clarity around debt obligations, especially those that are not tied to bonds. This is critical to unlocking credit ratings upgrades and future access to affordable finance.”

Countries such as Ghana, Sri Lanka, Zambia, and Suriname, which have already undergone debt restructuring, still struggle to recover due to outstanding liabilities with private lenders and lack of full creditor coordination. These unresolved debts are preventing rating agencies from lifting these countries out of default status.

Experts warn that elevated global interest rates and restricted access to capital markets are driving many countries to seek alternative financing, often through bilateral or bank loans that lack transparency and standardized restructuring clauses.

“The absence of transparency severely complicates restructuring efforts,” said José Viñals, former chairman of Standard Chartered and current representative of the private sector on the roundtable, speaking alongside BlackRock executives. “We need to see faster progress on loan transparency and coordination mechanisms.”

Unlike sovereign bonds, which often include Collective Action Clauses (CACs) enabling majority-driven decisions in restructuring, private bank loans typically lack such provisions, making coordinated action more difficult.

Viñals called for accelerated reform efforts in the coming months, including enhanced frameworks for managing non-bond debt and promoting collective lender responsibility.

The IMF confirmed that the G20, which initiated the Common Framework for Debt Treatments during the COVID-19 pandemic, is expected to issue a formal statement on sovereign debt issues later this week.

Meanwhile, initiatives such as the London Debt Sustainability Coalition, launched in mid-2025 with backing from the UK government, are working to improve legal clarity in debt contracts. The coalition also aims to incorporate clauses addressing natural disaster risks, a growing concern for vulnerable economies.

England and New York remain the key legal jurisdictions for most sovereign debt contracts globally, making them central players in any reform of global lending practices.

This renewed international focus on debt comes as global sovereign debt levels reach record highs, despite progress by some emerging markets in reducing their debt-to-GDP ratios. Many nations still face immense pressure from soaring debt service costs and limited access to international markets.

Investors and officials warn that unless urgent reforms are implemented, the next wave of debt crises may be harder to contain, especially as nations turn to hidden or high-risk financing to meet short-term needs.