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Experts recommend G20 framework as Africa’s debt default rate surges

Published

1 year ago

September 1, 2023

The growing debt profile of many African countries continues as a disturbing trend across the continent, and a reworking of the G20 framework has been proposed as a likely solution to managing the situation.

These were the issues of discourse at the African Conference on Debt and Development (AfCoDD III) which started in Senegal on Wednesday. It was noted at the event that more African countries were currently showing signs of either defaulting on their national debt or needing to apply to the G20 common framework.

The level of indebtedness in African countries is at its highest in more than a decade, largely due to the COVID-19 pandemic, Russia’s invasion of Ukraine, and skyrocketing inflation. African nations were forced to incur even more debt, and as a result, 21 low-income African nations are currently either insolvent or at great risk of experiencing debt hardship.

Five African nations have so far formally defaulted on their national debt: Zambia, Ghana, Ethiopia, Chad, and Sri Lanka. Zambia successfully applied for a debt restructuring plan under the G20 framework, a deal that has not yet been finalised.

The Board Chair of the African Forum and Network on Debt and Development (AFRODAD), Barbara Khalima-Phiri, noted that the debt crisis in most cases is the consequence of irresponsible borrowing.

She added, “Several countries on the continent have shown signs of wanting to apply for G20 common framework. Africa’s debt burden is directly becoming a burden on Africans who are having to pay the price of both irresponsible borrowing and equal irresponsible lending.”

The G20 is a framework under which bilateral official creditors are, during a limited period, suspending debt service payments from the poorest countries (73 low- and lower-middle-income countries) that request the suspension.

Some panellists at the AfCoDD III align with the position to have Africa’s debt reworked. AFRODAD Executive Director, Jason Braganza, pointed out that having a seat at the G20 common framework meant that the continent had to give up on some clubs such as the Borrower’s Club.

Patrick Ndzana Oloma, a policy advisor for the African Union Commission, said that if the continent’s nations continued to be underrepresented at the G20 common framework, they ran the possibility of having to negotiate debt agreements with odd terms.

Beyond Africa, some other countries have already concluded debt restructuring, for example, Argentina and Ecuador, while others like Lebanon are bent on debt restructuring.

Related Topics:Africa debt burden Featured

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IMF mission concludes 4th loan program assessment in Egypt

Published

3 hours ago

November 22, 2024

Ifeoluwa Dada

Following the completion of a recent visit to Egypt, the International Monetary Fund (IMF) has announced that its mission had achieved significant strides in policy talks aimed at concluding the fourth review of the IMF loan program.

The review is the fourth in Egypt’s most recent 46-month IMF loan program, which was authorised in 2022 and increased to $8 billion this year following an economic crisis characterised by high inflation and chronic foreign exchange shortages. It may unleash more than $1.2 billion in financing.

Along with reaffirming its commitment to maintain a flexible exchange rate system, the IMF stated that Egypt “has implemented key reforms to preserve macroeconomic stability,” including the unification of the currency rate that facilitated imports.

Earlier on Wednesday, Egypt’s Prime Minister Mostafa Madbouly said Cairo has asked the IMF to modify the targets for the programme not only for this year, but for its full duration, he added without giving more details.

“Discussions will continue over the coming days to finalize agreement on the remaining policies and reforms that could support the completion of the fourth review,” the IMF added in its statement.

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Kenya seeks $750m from World Bank, obtains $200m from AfDB— Official

Published

2 days ago

November 20, 2024

Ifeoluwa Dada

The head of debt management for the finance ministry told Reuters that Kenya had obtained a $200 million loan from the African Development Bank (AfDB) and was negotiating a fresh $750 million loan with the World Bank.

After being forced to abandon proposed tax rises costing more than 346 billion shillings ($2.68 billion) in June due to fatal demonstrations, the East African nation’s administration, which has been grappling with significant debt, has been frantically seeking fresh funding.

The Finance Ministry’s public debt management office director general, Raphael Owino, told Reuters that the IMF’s October clearance of the seventh and eighth reviews, which opened the door for a $606 million loan tranche, had aided the ministry’s talks for more loans.

“The World Bank is coming on board, riding on the back of IMF receipts,” Owino said. “The AfDB is already on board.”

The discussions for more assistance, which came under the World Bank’s “Development Policy Operations” (DPO) with the government, were confirmed by a representative at the organization’s Kenya office.

“The amount of the current (loan) is yet to be determined. The amount will also depend on the implementation of the policy reforms agreed upon,” the spokesperson told Reuters, adding that past DPO loans averaged about $750 million.

In May, the World Bank approved the latest round of DPO loans, totalling $1.2 billion.

According to a statement made last month by Finance Minister John Mbadi, Kenya has set a foreign borrowing goal of 168 billion shillings for the fiscal year ending in June 2025.