In recent months, the inefficiency of the G20 Common Framework has shone light on the complexity of African countries’ debt structure. According to a white paper released by Paris-based think-tank Financial Development Lab, one reason behind the slow pace of the process is the huge diversity of the creditors. “Creditor heterogeneity raises further new issues on how to share the burden of debt restructuring in a fair manner,” says the paper. The uneven distribution of creditors, the paper argues, makes it complicated to find a one-size-fits-all approach. In addition to creditor diversity, geopolitical tensions between the major Western creditors who meet as the Paris Club and China – which accounts for 12% of Africa’s private and public external debt – have translated into debt restructuring gridlock. “New emerging market creditors such as China, India, Saudi Arabia and others have not historically participated in coordinated official creditor mechanisms, often preferring bilateral discussions, and current geopolitical divergences make this coordination even more difficult,” says the paper. According to the paper the key to a successful debt restructuring process, therefore, are growth opportunities that can be unleashed in the debtor country.
IMF Identified 22 African States as Either already in Debt Distress or at High Risk of Debt Distress
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