In a significant diplomatic meeting held at the White House on May 23, 2024, U.S. President Joe Biden and Kenyan President William Ruto emphasized the need for increased international support for developing countries, particularly those burdened by heavy debt. The leaders' joint statement, dubbed the "Nairobi-Washington Vision," calls for robust debt relief measures from major bilateral creditors, including China.
The initiative addresses the crippling debt loads that hinder many low-income nations, constraining their ability to invest in essential development projects and tackle global challenges like climate change, pandemics, and conflicts. Approximately half of these nations are either in or nearing debt distress, diverting much of their revenue to debt repayments.
The Nairobi-Washington Vision outlines the necessity for international financial institutions and creditor countries to support nations committed to ambitious reforms and sustainable development. The statement highlights that countries with high-quality investment plans should receive financial backing, rather than be left to struggle alone.
Despite the establishment of the Common Framework for Debt Restructuring by the Group of 20 (G20) during the pandemic, progress has been slow. A senior U.S. Treasury official noted that while China, the largest official creditor, has taken steps to assist debt-laden countries, more comprehensive efforts are required.
President Ruto, during an interview last month, mentioned Kenya's expectation of a fresh $1 billion disbursement from the International Monetary Fund (IMF). With Chinese loans accounting for approximately 64% of Kenya's external bilateral debt, the country faces significant financial challenges, including the impending maturity of a $2 billion Eurobond in June 2024.
The U.S. has recently provided $250 million in crisis response funding through the World Bank's International Development Association. Additionally, it is working with Congress to secure $21 billion for the IMF's Poverty Reduction and Growth Trust and $36 billion for the World Bank. The U.S. also plans to collaborate with other G7 and G20 nations to foster private investment and coordinate relief efforts.
A senior Treasury official emphasized the need for a more effective system, stating, "It's not just China... The system needs to operate better."
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