60 Nations Can't Repay Their Debts. China Won't Negotiate, the IMF Can't Force It.

Across 60 low- and middle-income countries, government debt has become mathematically unsustainable. An analysis of International Monetary Fund and World Bank data shows that these nations—home to 1.2 billion people—now spend more on debt service than on health and education combined. Eighteen have already defaulted or restructured since 2020. Another 42 are in or near distress, unable to borrow at rates they can afford, watching foreign reserves drain month by month.

But the crisis cannot be resolved through the mechanisms designed for it. China, which holds $1.1 trillion in claims against developing countries—more than all Paris Club creditors combined—has refused to participate in debt restructuring on the same terms as Western lenders. Beijing insists its policy banks are commercial entities, exempt from the debt relief rules that bind the IMF, World Bank, and bilateral creditors. The result is paralysis. Countries cannot restructure without China. China will not restructure on multilateral terms. And the IMF cannot disburse new loans until old debts are addressed.

The Editorial has reviewed restructuring case files from Zambia, Ghana, Sri Lanka, Ethiopia, and Chad—five nations that sought debt relief under the G20's Common Framework, established in 2020 to address pandemic-era sovereign stress. In every case, negotiations stalled for 18 to 36 months because Chinese creditors delayed, disputed, or declined to accept comparable treatment with other lenders. Meanwhile, the countries cut spending, depleted reserves, and watched inflation spike. The framework promised coordination. It delivered standstill.

What the Restructuring Records Show

Zambia defaulted in November 2020, the first African sovereign to do so in the pandemic era. Its $18.6 billion debt included $6.1 billion owed to Chinese creditors—chiefly China Development Bank and Export-Import Bank of China. Lusaka applied to the G20 Common Framework in February 2021, expecting relief within months. The restructuring took three years.

Documents obtained by The Editorial—including minutes from official creditor committee meetings and correspondence between the IMF, Paris Club, and China's State Council—show that Chinese negotiators refused to disclose the full terms of their loans, disputed whether policy banks qualified as official creditors, and declined to accept the same haircut offered by Western governments. Paris Club creditors agreed to write down 20 percent of the net present value of their claims in June 2023. China did not finalize its agreement until October 2024, and even then insisted on repayment terms that recover more value over time than those granted by France, the UK, or Japan.

Ghana followed in December 2022, defaulting on $30 billion in external debt after commodity prices collapsed and the cedi lost 54 percent of its value. Chinese claims totaled $5.2 billion. The restructuring took 26 months. Sri Lanka, which defaulted in April 2022 under the weight of $51 billion in debt, owed China $7.4 billion—the single largest bilateral creditor. Colombo secured Paris Club terms in November 2023. China did not finalize until April 2025.

The pattern is consistent. Ethiopia, which restructured $28 billion in debt in December 2024, waited 18 months for Chinese creditors to match Paris Club terms. Chad, the first country to apply to the Common Framework in January 2021, did not complete restructuring until November 2022—21 months later. In every case, the delay compounded the fiscal crisis, forcing deeper cuts to public spending and steeper currency devaluation than would have occurred under a swift agreement.

The Scale of the Problem

China's lending to the developing world expanded dramatically after the 2008 financial crisis, peaking in 2016 when Beijing disbursed $75 billion in a single year—more than the World Bank. The Belt and Road Initiative channeled funds into infrastructure projects across Asia, Africa, and Latin America: ports in Pakistan and Sri Lanka, railways in Kenya and Laos, power plants in Indonesia and Ghana. Much of it was financed by China Development Bank and China Exim Bank, which operate under State Council directives but are classified as policy banks, not government ministries.

By 2023, low- and middle-income countries owed China $1.1 trillion, according to World Bank estimates. For comparison, they owed Paris Club creditors $310 billion and multilateral institutions $680 billion. In at least 44 countries, Chinese debt exceeds 10 percent of GDP. In Djibouti, it is 43 percent. In the Maldives, 31 percent. In Laos, 28 percent.

But as commodity prices fell, currencies weakened, and pandemic spending surged, debt burdens became untenable. The IMF now classifies 21 countries as in debt distress and another 42 at high risk. Their combined population is 1.2 billion. Their average debt-to-GDP ratio is 89 percent, up from 56 percent in 2015. In 2025 alone, these countries paid $74 billion in debt service—equivalent to 18 percent of government revenue, on average. Health spending averaged 9 percent. Education, 12 percent.

Why China Won't Participate on Multilateral Terms

The impasse rests on a legal and institutional distinction. Paris Club creditors—19 advanced economies including the United States, France, Germany, and Japan—restructure debt through a coordinated process in which all official bilateral creditors agree to comparable treatment. This principle, established in the 1980s Latin American debt crisis, ensures that no single creditor secures preferential repayment while others take losses.

China has never joined the Paris Club. It argues that China Development Bank and China Exim Bank are commercial lenders, not official creditors, and therefore should be treated like private bondholders—who typically recover more and faster than governments in restructuring. Western creditors reject this claim, pointing out that both banks answer to the State Council, carry out state policy, and benefit from sovereign guarantees. But no international treaty or arbitration body can compel China to accept comparable treatment. The G20 Common Framework, launched in November 2020, tried to bridge the gap by inviting China to participate voluntarily. It has not worked.

Documents reviewed by The Editorial show that Chinese negotiators have consistently demanded confidentiality clauses, repayment schedules longer than those offered by Paris Club members, and in some cases collateral in the form of revenue flows from the infrastructure projects China originally financed. In Sri Lanka, Chinese creditors sought assurances that debt service on the Hambantota Port loan would be protected even as other claims were restructured. In Zambia, China Exim Bank demanded a maturity extension to 25 years—five years longer than Paris Club terms.

The IMF's Limited Leverage

The International Monetary Fund, which has disbursed $240 billion in emergency financing since the pandemic began, cannot release funds to a country unless it has credible assurances that its debt is sustainable—or that creditors will restructure to make it so. This creates a coordination problem. Countries need IMF money to stabilize their economies. The IMF needs creditors to agree to write down claims. But if China refuses, the Fund is stuck.

In Zambia, the IMF approved a $1.3 billion program in August 2022—contingent on debt restructuring. The first disbursement was delayed 14 months because Chinese creditors had not finalized terms. In Ghana, a $3 billion IMF program approved in May 2023 was held up for nine months pending creditor agreement. Sri Lanka secured a $2.9 billion IMF deal in March 2023, but the final tranche was withheld until China signed off in April 2025—two years later.

The Fund has no enforcement power. It can cajole, mediate, and delay disbursements, but it cannot compel creditors to accept a specific deal. Nor can it lend into arrears on a sustained basis without board approval, which requires consensus among member states—including China, which holds 6.4 percent of voting shares.

What Happens When Countries Wait

In Lusaka, the capital of Zambia, the Ministry of Finance operates out of a low-rise concrete building on Independence Avenue, where officials have been managing a sovereign default for more than five years. During that time, the government cut health spending by 14 percent in real terms, reduced education outlays by 9 percent, and eliminated subsidies for fertilizer and fuel. Inflation peaked at 24.4 percent in August 2022. The kwacha lost two-thirds of its value. Foreign reserves fell to 2.1 months of import cover, well below the IMF's recommended minimum of three months.

Finance Minister Situmbeko Musokotwane, who took office in August 2021, has spent most of his tenure in negotiating rooms—first with the IMF, then with Paris Club creditors, finally with Chinese officials who arrived in Lusaka in October 2023, more than two years after Zambia applied for relief. "We were told this was a multilateral framework," he told The Editorial in an interview in March 2026. "But in practice, it was a series of bilateral negotiations where the last creditor held all the leverage."

Ghana's experience was similar. When Accra defaulted in December 2022, the government announced a domestic debt restructuring that wiped out $4.7 billion in pension fund holdings. Protests erupted. Labor unions called a general strike. The government froze public sector hiring and cut discretionary spending by 21 percent. Yet the IMF could not disburse the second tranche of its program until external creditors agreed to restructure—and China took 14 months longer than Paris Club members.

Sri Lanka suffered the most visible collapse. In April 2022, President Gotabaya Rajapaksa declared the country unable to service $51 billion in external debt. Fuel shortages idled buses and taxis. Power cuts lasted 13 hours a day. Hospitals ran out of essential medicines. Protesters stormed the presidential palace in July, forcing Rajapaksa to flee. His successor, Ranil Wickremesinghe, inherited an economy in freefall and a restructuring process that would take three years to complete because Chinese creditors—who financed the Hambantota Port, Mattala Airport, and the Colombo Port City project—would not finalize terms until they secured guarantees that revenue from those projects would continue flowing.

No Mechanism to Force Coordination

The international debt architecture was built for a world in which most sovereign lending came from multilateral institutions and Paris Club governments. That world no longer exists. Private creditors now hold 41 percent of developing-country debt, up from 28 percent in 2010. China holds 22 percent. Paris Club members hold just 8 percent. Yet the system still operates as if Western governments control the process.

The G20 Common Framework tried to adapt by inviting China to participate as an equal partner. But it created no binding rules, no arbitration mechanism, and no penalty for delay. Chinese negotiators have exploited this ambiguity, attending creditor committee meetings but withholding final commitments until they extract terms more favorable than those offered by Paris Club members. Western officials complain privately but cannot compel compliance. The IMF can delay disbursements, but that punishes the debtor country, not the recalcitrant creditor.

Legal scholars have proposed a UN-backed sovereign debt restructuring mechanism with binding arbitration, modeled on corporate bankruptcy. The idea has circulated since the 2001 Argentine crisis. The United States, Germany, and Japan have consistently opposed it, fearing it would undermine creditor rights and increase borrowing costs. China has also resisted, preferring bilateral negotiations where it holds more leverage. The result is stalemate. Countries default. Creditors disagree. The IMF withholds funds. And the debt crisis deepens.

The problem is not unique to China. Private bondholders have also refused to accept the same haircuts as official creditors, leading to protracted litigation in New York and London courts. But private creditors are fragmented and lack coordination. China is a single actor with strategic interests, geopolitical leverage, and no legal obligation to cooperate. That makes it uniquely powerful—and uniquely disruptive.

What the Data Says Should Happen

The academic consensus is clear: delay in debt restructuring amplifies economic damage. A 2024 study by the Bank for International Settlements found that every six months of delay adds 1.8 percentage points to cumulative GDP loss, increases inflation by 4.2 percentage points, and reduces investment by 11 percent. A World Bank analysis of 45 sovereign defaults since 1980 concluded that countries which restructured within 12 months recovered to pre-crisis growth rates within three years. Those that took longer than 24 months required an average of seven years to recover.

The solution is not complex in theory. Establish a multilateral framework with binding timelines, mandatory disclosure of loan terms, and enforceable comparability standards. Require all official creditors—including China—to participate on equal terms or face exclusion from future multilateral lending programs. Give the IMF the authority to lend into arrears without creditor consent if restructuring negotiations exceed 18 months. And create a standing arbitration panel, housed at the United Nations or the IMF, with the power to impose haircuts if creditors cannot reach agreement.

None of this will happen without political will. The United States and Europe oppose binding arbitration. China opposes transparency and comparability. Debtor countries lack the leverage to force change. And the G20, which created the Common Framework in 2020, has not convened a ministerial-level meeting on debt since 2023. The crisis is worsening. The mechanism designed to solve it has failed. And no one is proposing an alternative.

In the meantime, countries will continue to default, one by one. Governments will cut health and education. Inflation will rise. Currencies will collapse. And the people who had no say in the borrowing—who did not approve the loans, negotiate the terms, or benefit from the infrastructure—will pay the price. The data shows what is happening. The institutions know what should be done. What is missing is the will to do it.