African countries are facing serious COVID19 related debt distress. A short thread on why articles such as below, however well intentioned, play in the hands of (private) creditors.
ft.com/content/fff9c3…
ft.com/content/fff9c3…
basically, African countries are facing three camps in this fight: US-led official donors (including IMF&WB), China and private creditors.
None are a homogeneous block, but let's assume so.
None are a homogeneous block, but let's assume so.
Official donors agreed temporary liquidity relief - no debt service on official bilateral aid to December 2020.
African countries want this extended.
African countries want this extended.
why? because things can only get worse, and there is a reason why it's Ghana's Minister of Finance that has penned this FT op-ed
https://twitter.com/DanielaGabor/status/1313149728809529344?s=20
US-led official donors in G20 are pointing finger at China as obstacle in negotiations, and Ghana's MF on the same page.
G20 wants China to treat loans extended by its state-owned banks in Africa as official loans that fall under debt standstill (DSSI).
G20 wants China to treat loans extended by its state-owned banks in Africa as official loans that fall under debt standstill (DSSI).
But behind closed doors, Germany a dissenter: worry in Berlin is that taxpayer money going not to China, but to private creditors who unlike China, have not moved a finger since COVID19 pandemic.
here is the rub: several African countries, classified by WB as at high risk of debt distress, have not applied for DSSI because they are afraid of loosing access to Eurobond markets. Private creditors matter more in this story than China.
Ghanian Minister of Finance is being tactful here: private creditors have not stayed silent.
Instead, they are sending, via IIF, threatening letters to the G20.
Instead, they are sending, via IIF, threatening letters to the G20.
private creditor position on poor countries is: pain now, SDG related bond flows (maximising finance for development) later, and into commodified public services.
otherwise debt distress may extend to emerging countries.
otherwise debt distress may extend to emerging countries.
threat has been so far effective, particularly in some African capitals. The 'market access' camp sees private creditors as partners that should not be alienated but courted with subsidies a la #WallStreetConsensus
the most advanced of these - ECA's proposal for an African Repo market - the Credit Enhanced Special Liquidity and Sustainability Facility - because all roads in financial capitalism lead to repos (and Americanization of national financial systems)
https://twitter.com/DanielaGabor/status/1276430735394713602?s=20
if you're wondering why there are so many FT pieces on debt relief for poor countries, it's because tomorrow G20 ministries of finance/cb governors will announce the least ambitious plan to provide temporary liquidity relief
ft.com/content/01d5a4…
ft.com/content/01d5a4…
the new China-US/minions cold war is shaping negotiations, and poor countries, particularly in Africa, are being kicked around.
At least the FT a bit more balanced in reporting on who's doing the heavy lifting in actual debt relief.
At least the FT a bit more balanced in reporting on who's doing the heavy lifting in actual debt relief.
imagine a universe in which all these things happen at the same time.
I am not an expert in debt restructuring, but looks to me like official donors are doing a Pontius Pilate instead on mandating private creditor involvement.
I am not an expert in debt restructuring, but looks to me like official donors are doing a Pontius Pilate instead on mandating private creditor involvement.
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