Trapped in the crossfire of the U.S.-China rivalry
Small countries like Suriname challenged by cash need, debt
Inside his capacious office, his tan curtains drawn against the tropical sun, the president of Suriname expressed sympathy with the striking teachers who were amassing outside, taunting him while demanding higher wages.
Three years of unmitigated catastrophe have destroyed spending power in this South American country — the result of global crises landing atop decades of profligate governance. Food and fuel prices have soared, worsened by Russia's war on Ukraine. The national currency plunged and the economy cratered just as the pandemic spread death and fear.
“The heavy burden on my people,” President Chandrikapersad Santokhi said, gave him a “moral responsibility to provide relief.”
Yet he had little to offer. The fortunes of his country of 600,000 people were caught in the geopolitical crossfire, its access to aid delayed by the conflict between the United States and China.
The next week, a delegation from the International Monetary Fund arrived from Washington to prod Santokhi's administration to advance a round of spending cuts. Budget austerity was the central requirement for the fund's rescue program — a threeyear, $690 million package of low-interest loans designed to give Suriname the wherewithal to continue payments on $2.4 billion in foreign debt.
The IMF and its most influential participant, the United States, also wanted something else: They were adamant that Chinese creditors restructure $545 million in debt — loans Suriname had used to build roads and housing.
The challenges facing Suriname illustrate one of the new complexities in global finance. As scores of middle- and lower-income countries grapple with an intensifying debt crisis, assistance is often held up by conflict between traditionally dominant Western institutions and a significant rising player: China.
In decades past, the International Monetary Fund — a central component of the liberal democratic order forged by the United States and its allies at the end of World War II — was the only source of cash for nations that struggled to pay their bills. China has since emerged as a major lender for countries from Asia to Africa to Latin America. Its financial institutions dispense loans accompanied by few demands, providing an alternative to the austerity prescribed by the IMF.
But as strapped governments negotiate with creditors to diminish their debt burdens, the IMF and the Biden administration have balked at providing relief until Chinese financial institutions participate. Otherwise, they assert, Chinese lenders are free-riding on debt forgiveness extended by others.
“China now needs to step up as a constructive force in assisting debtstressed countries,” Jake Sullivan, the U.S. national security adviser, said during a speech in April at the Brookings Institution.
Yet an increasingly assertive Chinese government has refused to bow to Washington — not to the IMF, and not to its largest shareholder, the United States.
“The IMF gives some parameters relating to the debt relief, but for us, I think it is not binding,” said a Chinese diplomat in Paramaribo, Suriname's capital, who spoke on the condition of anonymity so he could speak openly. “China will negotiate only with the Surinamese government.”
All of which underscores the pressures bearing on countries from Ghana to Ethiopia to Pakistan, each facing escalating debt, much of it to state-owned Chinese lenders.
Last week, the government of Zambia hailed an agreement securing a three-year reprieve on payments for $6.3 billion in debt, the bulk of it to Chinese lenders. That cleared the way for the IMF to release $188 million in relief funds under a $1.3 billion rescue package. The arrangement came only after a year and a half of torturous negotiations that left Zambia's finances in a precarious state.
Global trouble frequently leaves lower-income countries confronting untenable financial obligations. The current wave of calamity is especially wrenching — the product of years of low interest rates, which encouraged borrowing, combined with the misery of the pandemic, which added to burdens on health care systems as economies contracted.
This time, resolution has been vexed by the evolving hostilities between the world's two largest economies.
“If there is one obligation for the powers that be, whether it is China or the U.S., it's to provide some certainty and security to the world,” Suriname's foreign minister, Albert Ramdin said. “Uncertainty will create anxiety and will make countries choose sides.”
A so-called Common Framework crafted nearly three years ago by the Group of 20 nations is supposed to provide a template for what happens when countries sink into insolvency. Governments, private creditors and institutions like the IMF are to coordinate debt restructurings, allowing strapped nations to manage their future payments.
But the IMF serves as the default arbiter of the terms. With the Chinese government unwilling to assent, the system tends to seize up.
“You have new creditors that want to have a say over what the rules of the game should be,” said Daniel Munevar, a sovereign debt expert at the United Nations Conference on Trade and Development in Geneva.
The concerns of ordinary people in indebted nations are typically “nowhere to be seen,” Munevar said. Rather, they are subsumed by politically loaded negotiations that cater to the interests of creditors.