The economic shock unleashed by the COVID-19 epidemic has exacerbated the struggles of many emerging-market and developing economies (EMDEs) to repay their external debt. As global interest rates rise or financing conditions tighten, debtors and creditors alike face the enormous challenge of restructuring their debts and other obligations without strangling economic growth in debt-burdened countries. 

One of the most urgent challenges relates to debt owed to China, whose lending spree under its Belt and Road Initiative and other programs has played an outsized role in what amounts to a crisis for many countries. The scope of the problem is striking. China is owed more than $100 billion, or 57 percent of all debt owed to official creditors by the countries that most urgently need help. China is not a member of the Paris Club of official creditors, which coordinates, within a multilateral framework, the resolution of general sovereign illiquidity or unsustainable external debt of EMDEs. This coordination includes the sharing of information about the amounts and terms of claims against a debtor country. China’s absence from this system makes it difficult to coordinate with it as an official creditor.