Private creditors oppose comprehensive debt relief for Africa
LONDON (Reuters) – Prominent emerging market creditors have set up a task force to help heavily indebted African countries cope with the economic impact of COVID-19, but have criticized G20 calls for general debt relief. the debt.
The African Private Creditors Working Group (AfricaPCWG) said it coordinates the views of more than 25 asset managers and financial institutions representing total assets under management of more than $9 trillion.
The Group of 20 major economies (G20) had urged private creditors to stick to their agreement to suspend debt payments for the world’s poorest countries for the rest of the year so that the money could be spent on tackling the coronavirus pandemic.
In a statement, the new task force, which includes funds Farallon Capital Europe, Aberdeen Asset Management, Amia Capital, Greylock Capital and Pharo Management, said it would work with countries on a “case-by-case” basis.
But he warned that a one-size-fits-all solution would be counterproductive.
“A global and hasty approach developed in times of crisis will jeopardize this crucial long-term access to capital,” the AfricaPCWG said, adding that it stands ready to ensure that access to private capital remains for countries.
The World Health Organization has warned that COVID-19, the respiratory disease caused by the new coronavirus, could infect between 29 and 44 million people in Africa this year if not contained, meaning that already weak health systems could be overwhelmed.
African countries face a combined $44 billion bill for debt servicing this year alone and Tim Jones, policy manager of the Jubilee Debt Campaign, a UK-based charity that works to end poverty, underscored calls for debt relief.
“Unless debt payments to private lenders are cancelled, IMF loans and the G20 debt suspension will be used to pay high interest to private lenders, an outrageous use of public money,” he said. he declared.
The G20 announced on April 15 an agreement with the Paris Club group of major creditor countries to freeze debt payments for the 77 poorest countries from May 1 until the end of the year. Their goal was to free up more than $20 billion that poor governments could use to strengthen their health services.
Ethiopian Prime Minister and Nobel Peace Prize winner Abiy Ahmed said this month that the measure should also be extended until next year to help the continent finance investments in health care and social safety nets.
But Kenya’s finance minister here said on Friday that his country would not request a suspension of debt payments because the terms of the agreement were too restrictive, and he worried about the impact that debt relief could have on the rating loan from Kenya.
Friday’s pushback against general debt relief underscores the difficulty such a proposal faces.
World Bank Director David Malpass said last month that the private sector should not get a “free ride”.
The Institute of International Finance (IIF) trade group initially recommended private sector involvement, but later flagged private creditor concerns to the IMF, World Bank and Paris Club about their involvement.
The group estimates that the total amount of external debt in G20 Debt Service Suspension Initiative countries has more than doubled since 2010 to more than $750 billion. Debt now averages over 47% of GDP in these countries as well, a high figure given their stage of development.
On Friday, the IIF said launching specialized groups like AfricaPCWG was a natural step, given the heterogeneity of borrowers and credits, and supported a case-by-case approach. He said he welcomed “critical conversations” between eligible countries and their creditors.
AfricaPCWG, which declined to name its other members, said it would provide African governments, the G20, the IMF and other multilateral development banks with a forum through which all stakeholders “can transparently engage. and constructive” on issues related to the coronavirus crisis.
“Transparent coordination, above the board, of creditors can be a positive move,” said Eric LeCompte, executive director of Jubilee USA Network, an independent charity affiliated with the Jubilee Debt Campaign.
“However, some creditors simply want to form a bloc to force more loans and maintain their payments, instead of agreeing to real debt relief so that all parties can get through a crisis.”
Reporting by Marc Jones and Tom Arnold; additional reporting by Andrea Shalal in Washington; written by Andrew Cawthorne, Larry King; edited by Mark Potter and Grant McCool