Debtors Africa

BY EMEKA EJERE

The central banks of some of the world’s richest countries (G-20) are considering a debt swap deal for African countries that will help cushion the adverse economic effects of the COVID-19 pandemic.

The deal, which is being managed by a United Nations steering committee, will work in such a way that African countries can be relieved of their debt repayment obligations, without triggering the consequences that come with default.

The implication is that if this deal eventually comes to fruition, payments on international bonds that are due this year would be channeled back to African countries.

Meanwhile, investors would receive compensation in the form of securities issued by an international organization that would be set up and guaranteed by the unnamed G-20 central banks.

A report by Bloomberg noted that this arrangement is akin to the 1980s Brady plan which converted bank loans owed by countries in Latin America into securities that were guaranteed by U.S Treasuries.

According to Vera Songwe, the executive secretary of the UN Economic Commission for Africa, in the meantime, there are only three African countries that are interested in this arrangement,

She also explained that the loan swap deal would allow private creditors to join the debt relief plan for low-income countries that have been hit hard by the pandemic.

Although Songwe did not disclose the names of the African countries that have indicated interest, there are indications that Nigeria could be among them. This is because in April this year, Nigeria’s Minister of Finance and National Planning, Zainab Ahmed, disclosed during an interview that the country had approached some multilaterals for debt deferral.