The U.S.-China Rivalry Is Complicating the World’s Debt Crisis
Suriname, like other low- and middle-income countries, confronted untenable debts after borrowing that was encouraged by years of low interest rates.
The Port of Paramaribo handles most of Suriname’s cargo shipping, serving the capital and major towns.
A vegetable truck leaves Paramaribo’s Central Market. The inflation rate in Suriname is near 60 percent.
Inside his capacious office, his tan curtains drawn against the tropical sun, the president of Suriname expressed sympathy with the striking teachers who were massing outside, taunting him while demanding higher wages.
Three years of unmitigated catastrophe has 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 declared, 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 following week, a delegation from the International Monetary Fund would arrive from Washington to prod Mr. Santokhi’s administration to advance a round of spending cuts. Budget austerity was the central requirement for the fund’s rescue program — a three-year, $690 million package of low-interest loans designed to give Suriname the wherewithal to continue payments on $2.4 billion in foreign debts.
The I.M.F. 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 I.M.F.
But as strapped governments negotiate with creditors to diminish their debt burdens, the I.M.F. 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 debt-stressed 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 I.M.F., and not to its largest shareholder, the United States.
“The I.M.F. 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 debts, 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 I.M.F. 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,” said Suriname’s foreign minister, Albert Ramdin. “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 International Monetary Fund are to coordinate debt restructurings, allowing strapped nations to manage their future payments.
But the I.M.F. 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,” Mr. Munevar added. Rather, they are subsumed by politically loaded negotiations that cater to the interests of creditors.
In Suriname, the costs are borne by families in places like the Sunny Point neighborhood, south of the capital.
Mametoen Misiedjan, 26, and her 4-month-old daughter were crammed into her mother-in-law’s two-bedroom concrete home with her three sisters-in-law and their eight children. The toddlers played in the dirt, alongside a ditch coursing with sewage.
She had moved in recently, after the rent on her own home became impossible.
Ms. Misiedjan worried about how she would pay for diapers, and whether her breast milk would be affected after she had to reduce her food portions because of mounting costs for rice, vegetables and chicken.
“I don’t have any hope left,” she said. “I sit and cry.”
The Roots of Calamity
Suriname’s modern history is largely the story of outsiders arriving in brazen pursuit of riches.
Its soil was fertile enough to entice the Dutch to secure control in the 17th century through a trade with Britain, swapping their colony of New Amsterdam — today better known as New York City.
The Dutch brought enslaved people from Western Africa and indentured laborers from Java and India to work sugar plantations.
In more recent times, Alcoa, the American aluminum maker, erected the region’s first aluminum manufacturing complex, powered by a hydroelectric dam that also supplied cheap electricity to the populace.
When Alcoa’s domestic subsidiary shut the plant seven years ago, the government continued to distribute cheap electricity while absorbing the rising costs of production.
Those subsidies grew to staggering proportions, according to an analysis by Mr. Munevar. Here were the roots of Suriname’s debt crisis.
By 2016, the government sought help from the International Monetary Fund, agreeing to a $478 million rescue package. The fund demanded that Suriname scrap subsidies for water, gas and electricity.
The country was then led by Dési Bouterse, whose legacy includes murder charges for the assassination of 15 political opponents, and an 11-year sentence on drug-trafficking charges in the Netherlands.
His government collected the first $81 million installment from the I.M.F., but then renounced the program and its budget strictures. Instead, he borrowed nearly $1.5 billion, much of it from Chinese creditors.
Lending from Chinese financial institutions to countries in distress has expanded drastically, reaching nearly one-fifth of the I.M.F.’s activities, according to recent research. Almost two-dozen countries facing debt crises have received more than $185 billion in such credit since 2016, the research found.
Much of this money has come as loans from China’s central bank, the People’s Bank of China, and frequently used to make payments on loans to other Chinese lenders.
Suriname secured a credit line worth about $160 million from the Chinese central bank. It tapped some of these funds to pay Huawei, the Chinese telecommunications equipment manufacturer, to upgrade a mobile telephone system. Suriname also borrowed more than $300 million from the Export-Import Bank of China, a state-owned institution that lends in support of Chinese government policies.
For a time, Suriname was able to manage its debt payments because of a rise in the price of gold, the source of more than half of the country’s export revenues.
Then came the pandemic. Commodity prices plunged, just as health care costs expanded.
Mr. Bouterse was defeated in an election in May 2020. He ceded power to a coalition government headed by Mr. Santohki.
The new president inherited an economy that contracted by nearly 16 percent over 2020. The currency eventually lost 80 percent of its value.
That increased the cost of imports, from gasoline to staple foods. The inflation rate peaked at 74 percent in 2021, and remains near 60 percent.
The amount of government revenue required to manage Suriname’s debt payments increased to 25.3 percent last year from 13.6 percent in 2022, according to Debt Justice, an advocacy organization.
That left less money for everything else.
At ‘S Lands Hospital in downtown Paramaribo, surgeries now require the improvised substitution of drugs and anesthetics to replace those that have become too expensive.
“The alarm bells are ringing,” said the hospital’s Dutch-educated medical director, Soenita Nannan Panday-Gopisingh.
Seeing no alternative, Mr. Santokhi’s government returned to the I.M.F.
‘Now We Are Trapped’
The fund nursed worries about re-engaging with Suriname, given the debacle of the previous program. But officials were eager to support the new government.
In April 2021, I.M.F. staff agreed to a new rescue plan that obligated Suriname to cut public spending by 10 percent of national economic output.
But the fund’s board did not approve the program until late December of that year, as staff sought assurances from the Chinese government that it would agree to debt relief.
“In that period, we were crushed,” said Suriname’s finance minister, Stanley Raghoebarsing.
In March 2022, the fund released another $55 million. Two months later, an I.M.F. delegation visited Suriname and announced that the government was entitled to receive its next infusion of cash.
But the board never followed with a vote — an extraordinary deviation from the I.M.F. process.
The port of Paramaribo.
Inflation has caused the cost of food to rise dramatically.
Suriname’s main exports are minerals, wood, petroleum and fish.
The delay reflected the concerns of a powerful actor: The U.S. Treasury — which handles the American relationship with the I.M.F. — pressured the fund to withhold the money to compel China to commit to debt relief, according to two sources involved with the process.
In Congressional testimony, Treasury Secretary Janet Yellen recently described the I.M.F. and the World Bank as “an important counterweight to nontransparent, unsustainable lending from others like China.”
That prompted a rebuke from the Chinese government. “The I.M.F. is not the ‘International Monetary Fund of the United States,’” a foreign ministry spokesman said at a news conference.
In May, private bondholders agreed to forgive 25 percent of their Surinamese debt in exchange for a guarantee of proceeds from recent offshore oil finds.
This month, the fund released another $53 million, while praising Suriname’s government for “restoring fiscal discipline.”
‘The President Is Hiding’
While officials in Washington and Beijing analyze ledgers, Suriname’s people continue to grapple with grave scarcity.
Just before 11 on a sweltering Tuesday morning in May, four dozen schoolteachers gathered alongside the muddy Suriname River, taking refuge under a leafy almond tree. They prepared to march toward the presidential palace to demand higher wages.
Eufrazia Martin, 48, a teacher at a public high school, had seen the value of her pay reduced to $200 a month from about $800 as the national currency plunged.
She was able to feed her family with help from relatives in the Netherlands. Many of her students were less fortunate.
“There are children every day that come and say, ‘I’m hungry,’” she said.
Some children did not make it to school because their families could not afford to pay for the minibus as fares increased with the price of gas.
Some were too tired to concentrate on their studies because they were working after-school jobs to help their families.
Some girls sold themselves to men to earn money for their households, became pregnant and dropped out of school.
Ms. Martin was headed into the cabinet office for a meeting with the president.
She and a handful of other leaders stepped into the building, as leaden skies gave way to a downpour. Fifteen minutes later, they were back outside.
“They told us that the president could not be found,” she declared as a crowd of roughly 100 protesters erupted into jeering chants.
“The president is hiding,” they hollered in Dutch.
Ms. Martin was willing to consider that the president might simply be unable to come up with any money. But she could not countenance his failure to show up.
“It’s disrespectful,” she said. “If he comes and talks to us, maybe we would understand.”
Ank Kuipers contributed reporting.
Peter S. Goodman is a global economics correspondent, based in New York. He was previously London-based European economics correspondent and national economics correspondent during the Great Recession. He has also worked at The Washington Post as Shanghai bureau chief. @petersgoodman
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