A group of private creditors in emerging-markets have opposed a blanket debt relief for all African countries. They have also set up a group to help heavily indebted African nations coordinate responses to the economic impact of COVID-19.
The Africa Private Creditor Working Group (AfricaPCWG) will coordinate the views of over 25 asset managers and financial institutions representing total assets under management in excess of $9 trillion, it said in a statement on Friday.
It will provide African governments, the G20 group of major economies, the International Monetary Fund and other multilateral development banks with a forum through which all stakeholders “can engage transparently and constructively” on issues from the coronavirus crisis, a Reuters report said.
African governments are fighting to manage the effects from the coronavirus, which the World Health Organisation has warned could infect 29 million to 44 million people on the continent in the first year if it’s not contained.
African countries also face a combined $44 billion debt-servicing bill this year alone.
The working group said it “stands ready to buttress efforts being made by the multilateral and bilateral sectors by offering its collective institutional experience to provide guidance and support on a case-by-case basis”.
However, it added a one-size-fits-all solution would be counterproductive. The G20 has urged private creditors to match their proposal to allow the poorest nations to suspend debt payments for the rest of the year.
Private creditors needed to accept they cannot make large profits from lending to poor countries, said Tim Jones, head of policy at Jubilee Debt Campaign, a UK-based charity working to end poverty.
“Unless debt payments to private lenders are cancelled, IMF loans and the G20’s debt suspension will be used to pay high interest to private lenders, an outrageous use of public money,” he said.
The G20 announced on April 15 an agreement with the Paris Club group of major creditor nations to freeze debt payments for the 77 poorest countries from May 1 to the end of the year, as requested, to free cash for the pandemic.
But the Institute of International Finance (IIF) trade association, which previously issued a rallying call to the private sector to join the initiative, earlier this month flagged creditors’ concerns to the IMF, World Bank and Paris Club about their involvement in such a move.
“A rushed, blanket approach developed during a time of crisis will put that crucial long-term access to capital at risk,” the AfricaPCWG said.
Farallon Capital Europe, Aberdeen Asset Management, Amia Capital, Greylock Capital Management and Pharo Management were among the members of AfricaPCWG.
It declined to name the other members.