► “States must constrain private creditors”
Lison Rehbinder, development finance advocacy officer at CCFD-Terre solidaire
“It is both necessary and possible to cancel the debt of African countries, at least in part. Necessary, because several states on this continent already have an unsustainable debt. Their economies are therefore not able to withstand a shock, internal or external, as seen during the Covid in 2020 and the shutdown of global activity caused by the pandemic.
Hence the debt suspension initiative in April 2020, at the call of France in particular, relating to 11.8 billion euros. But this suspension, already insufficient, has been completed since the beginning of 2022 and the repayment deadlines are resuming. Countries are therefore led to drastic decisions to honor them, such as the non-funding of public services such as health, education, etc.
→ ANALYSIS. The debt of African countries arouses appetite
It is possible to restructure or cancel debts, at the initiative of public creditors – States and international institutions – but also of private creditors. The latter can be forced to do so by the States, whose role it is to regulate the private sector when it is necessary to participate in the effort. Most loan contracts are registered in London and New York. And it is urgent to finally create a unique framework and place to bring together all the players concerned around the same table, and to organize restructurings or cancellations that share the efforts equitably. Because we cannot leave things as they are: 60% of African states today pay more to repay their debts than for health. »
► “Restructuring is more complex than before”
Anne-Laure Kiechel, Founder of Global Sovereign Advisory, consulting firm in the States
“The debt of African countries has increased sharply in recent years. The average debt ratio rose from 33.5% between 2010 and 2017 to 50.4% in 2019, then 57.3% at the end of 2020; and this while the tax margin of the States has been undermined by the Covid-19.
These countries should also suffer the repercussions of the Ukrainian conflict, in particular those which import oil, gas and agricultural raw materials. The “Heavily Indebted Poor Countries” initiative launched in 1996 has enabled some fifty countries (three quarters of which are African) to make their debt sustainable again, through cancellations or rescheduling. At that time, it was essentially in the hands of international institutions (IMF, World Bank, etc.) and of the States united in the Paris Club.
Since then, it has changed in nature with the arrival of new bilateral creditors (China for nearly 400 billion dollars, but also Turkey and the countries of the Arabian peninsula) and private creditors. This makes restructuring more complex at present, as in Chad or Zambia, because they have to persuade several categories of creditors, with divergent constraints.
Private creditors have a fiduciary duty to their own investors (defend the return on clients’ savings, editor’s note), which often encourages them to adopt minimalist positions in terms of debt reduction. For “country” creditors, the diplomatic dimension takes precedence. All this makes recent restructurings more complex than in the past. »