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Coronavirus: African finance ministers discuss debt restructuring to navigate coronavirus pandemic

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Addis Ababa, Ethiopia, October 4  (Infosplusgabon) – The UN Economic Commission for Africa (ECA) has led African ministers of finance and development in talks with international development partners, emphasising the importance of addressing the capital needs of international financial institutions and a debt renegotiation in favour of African countries hit hardest by the coronavirus pandemic.

 

The ministers of finance and their representatives held a virtual Summit with the ECA executives and the members of the Institute of International Finance (IIF) to discuss the role of the private sector in supporting the low-income countries through the coronavirus pandemic crisis and after the crisis.

 

“We all agree that access to private capital is essential to economic growth and development, the post-COVID-19 recovery, as well as raising living standards and creating greater prosperity across Africa,” the ECA said in a statement Friday.

 

The Institute of International Finance is the global association of the financial industry, with more than 450 members from more than 70 countries. The ECA and the African finance ministers emphasized the importance of private capital and its growing role in Africa over the last decade.

 

The ministers and representatives of state governments noted it was crucial that countries with market access and the appropriate macroeconomic framework continue to have the opportunity to access finance from the IIF as a complement to concessional financing.

 

The IIF helps coordinate the views of over 100 of the world’s foremost asset managers, banks, and other financial institutions providing private finance to nations and companies through Eurobonds, syndicated loans, trade finance and other credit structures across the continent of Africa.

 

These investors bring significant expertise and experience in Africa and other emerging markets, and represent total assets under management in excess of US$45 trillion, according to the ECA.

 

A number of countries which access funding from the private capital investors pursue policies to increase investor confidence, attract investment, obtain greater market access, and lower their cost of capital.

 

The ECA and the finance ministers agreed to promote efforts to increase access to private capital.

 

“New initiatives to help further lower the cost of capital must be encouraged and implemented swiftly - such as the creation of repo markets for frontier issuances as part of the Liquidity and Sustainability Facility. Where additional liquidity can be provided it must be the priority,” the ministerial conference concluded.

 

Regarding the upcoming discussions about the G20’s Debt Service Suspension Initiative (DSSI) at the International Monetary Fund and World Bank Annual Meetings, the group noted that extending the bilateral DSSI through 2021 would allow much-needed debt relief.

 

All creditor countries are encouraged to participate fully in an extended DSSI. Further, the group said “the upcoming meetings should include a discussion on how to capitalize international financial institutions so they can pursue credit-enhancement frameworks with the borrowing countries and the private sector to lessen the impact of COVID-19 on the world’s poorest and most vulnerable.

 

"No two countries entered the crisis in the same position, and their economic situations continue to reflect the diversity of the African continent. The private capital investors recommended a case-by-case approach to resolving any potential insolvencies as the most viable solution to the debt distress caused by the coronavirus pandemic. However, it also took note of the work of the IMF on a new debt restructuring framework that would allow countries willing to participate to opt in.

 

"All stakeholders, including debtor countries and the private sector, should have a seat at the table and their views must be considered. We strongly encourage open, inclusive and transparent consultation with private creditors and African Sovereigns as reform options are considered on the private sector initiatives as well as the debt restructuring framework, and building on the recently concluded UN Financing for Development conference.”

 

FIN/ INFOSPLUSGABON/PLM/GABON2020

 

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