The Africa Confidential Blog
Debt diplomacy in the pandemic
The lack of a coordinated response by commercial and official creditors to the worsening debt distress faced by resource-based African economies could trigger a wider payments crisis ahead of the annual meetings of the International Monetary Fund and World Bank next month.
At the videoconference, delegates will be under pressure to produce a longer-term strategy to manage the financial ructions triggered by the coronavirus pandemic.
Though a plethora of ratings agencies and analysts have warned that many African states will face debt distress, commercial creditors have fiercely resisted any formal cooperation on a debt initiative beyond a suspension, but not rescheduling, of payments due this year. They are likely to extend that programme into next year while fending off demands for more serious concessions. This is after rejecting an African Union proposal for a Brady Bond initiative in which some commercial debt could be backed by official institutions then converted into tradeable bonds.
Chad and Zambia warned this week that they will have to default on commercial payments. Zambia’s request for a suspension of repayments to holders of its US$3bn Eurobond was the first Covid-19-related default by a sub-Saharan African country. Angola, a much bigger debtor, currently benefiting from IMF backing as it restructures its obligations, has vowed to meet its Eurobond payments while it looks for relief from other creditors. The chickens are rapidly coming home to roost.