WIREDGOV

EXPERT COMMENT

Africa is experiencing its first continent-wide recession in 25 years due to the impact of the COVID-19, but many southern African states were already in economic distress prior to the pandemic – with Angola, Mozambique, Zambia and Zimbabwe partly because of unsustainable debt burdens they owe to China.

The COVID-19 crisis propelled African debt – and repayment and forgiveness – to the top of the international agenda once again, although this time much of the debt is bilateral, non-concessionary, or commercial in origin.

In April, the World Bank’s Development Committee and G20 finance ministers endorsed the Debt Service Suspension Initiative (DSSI) which includes 40 African Least Developed Countries (LDCs). This G20 initiative, backed also by the IMF and G7, does not provide any reduction in the net present value of debt, but it suspended repayment to no earlier than June 30, 2021.

Although the DSSI is not offering debt relief, only postponement, the G20 and the Paris Club of creditors have now endorsed a new common framework for debt relief, which aims to allow indebted poor nations to apply for debt relief – including write-offs – while ensuring all creditors negotiate on the same level playing field.

The Paris Club has also agreed to a Memorandum of Understanding supporting the DSSI principle, and is advising how these can be translated into revised lending agreements as well as trying to co-ordinate with non-Paris Club creditors such as China – but with mixed results.

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