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Home Africa

Mozambique, Angola likely to join G20’s Common Framework to restructure debt – IIF

Rafael Carvalho by Rafael Carvalho
March 11, 2021
in Africa, Angola, Budget, Debt, DFI, Economy, FA, Finance, Mozambique
Reading Time: 17 mins read
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The Washington-based Institute of International Finance (IIF), which represents private creditors worldwide, stated yesterday it considers Angola and Mozambique as some of the countries most likely to join the G20’s “Common Framework for Debt Treatments beyond the Debt Service Suspension Initiative (DSSI)” to restructure their private debt.

Countries that have already participated in the DSSI and which are highly dependant in terms of debt service are the most likely to be able to adhere to the Common Framework, reads a note from the institution’s department of economic studies.

This means that African countries such as Angola, Mozambique, Ethiopia, Cameroon, Cabo Verde, Congo, Zambia, amongst others, fall under these conditions. (see full table at the bottom of this article).

In contrast, the report states that countries like Ivory Coast, Senegal and Zambia which may have a more active creditors base and with large volumes of unpaid private debt may be reluctant to adhere to debt treatment under the Common Framework due to concerns about potential downgrades in the rating and loss of market access.

The report comes at a time when Mozambique may be starting negotiations with the International Monetary Fund (IMF) for financial assistance and also on the heels of Angola’s recurrent guarantees that it will not seek to restructure the debt with private creditors, more specifically sovereign debt bonds (Eurobonds).

Also read: Cabo Verde benefits from World Bank Debt Service Suspension Initiative (DSSI)

The DSSI is helping countries concentrate their resources on fighting the pandemic and safeguarding the lives and livelihoods of millions of the most vulnerable people. Since it took effect on May 1, 2020, the initiative has delivered about US$5B in relief to more than 40 eligible countries.

In all, 73 countries are eligible for a temporary suspension of debt-service payments owed to their official bilateral creditors. The G20 has also called on private creditors to participate in the initiative on comparable terms. The suspension period, originally set to end on December 31, 2020, has been extended through June 2021.

The IIF concludes the report stating that last year “a record number of sovereign debt defaults” was reached, pointing to the cases of Lebanon, Zambia, Argentina, Belize, Ecuador and Suriname.

The outlook was made slightly better, the report claims, due to a number of factors, including DSSI itself, as well as the increased support of multilateral finance institutions, which rose 30% in 2020 to more than US$120B.

Additionally, the report alludes to an increase in internal financing as another factor alleviating the crisis, with the issuance of bonds in local currency more than doubling, to US$105B in the 73 countries eligible for DSSI.


Fitch Ratings writes about G20’s Common Framework:

The “Common Framework for Debt Treatments beyond the DSSI” is a new instrument for dealing with sovereign debt vulnerabilities. This report analyses the main characteristics of the Common Framework, the implications for private-sector creditors and for sovereign ratings, and discusses some key factors affecting whether sovereigns may seek Common Framework treatment.

Focus on Unsustainable Debt Situations

The Common Framework is available to the same set of countries that are eligible for the Debt Service Suspension Initiative (DSSI) and involves the same group of 39 official bilateral creditors from the G20 and the Paris Club. But while the DSSI aims to provide fast relief to the pandemic shock for a broad range of low-income countries, the Common Framework focuses on cases involving a challenging debt burden. The priority is on maturity extensions, while haircuts are reserved for exceptional cases.

Private-Sector Involvement Required

Most importantly from a rating perspective, the Common Framework explicitly requires debtor countries to seek comparable treatment by other external creditors, including the private sector, while the DSSI had only encouraged private-sector participation.

There is still some uncertainty, not least because the Paris Club can make exceptions. However, past Paris Club agreements (other than the DSSI) have typically required private-sector participation.

You may download Fitch’s Report by accessing their website

 


 

Country4 DSSI Participation?5 Risk of external debt distress2 Risk of overall debt distress2 Date of DSA Publication Potential DSSI Savings May-December 2020 Potential DSSI Savings January-June 2021
% of GDP USD millions % of GDP USD millions
Afghanistan Yes5 High High 11/20 0.2 39.3 0.2 36.7
Angola3 Yes5 … … 1.9 1734.9 1.4 1292.8
Burkina Faso Yes5 Moderate Moderate 11/20 0.2 24.2 0.1 12.7
Cabo Verde Yes5 High High 10/20 0.9 18.0 0.8 15.8
Cameroon Yes5 High High 10/20 0.9 337.3 0.7 271.9
Central African Republic Yes5 High High 04/20 0.3 7.4 0.4 8.7
Chad Yes5 High High 07/20 0.6 65.4 0.4 43.9
Comoros Yes5 Moderate Moderate 04/20 0.2 2.3 0.2 1.9
Congo, Dem. Rep. Yes5 Moderate Moderate 04/20 0.3 156.3 0.2 105.9
Congo, Rep. Yes5 In distress In distress 01/20 1.4 181.8 1.5 190.5
Côte d’Ivoire Yes5 Moderate Moderate 12/20 0.4 224.0 0.1 67.7
Djibouti Yes5 High High 05/20 1.7 56.8 2.0 66.7
Dominica Yes5 High … 06/18 0.7 4.3 0.6 3.7
Ethiopia Yes5 High High 04/20 0.5 472.9 0.4 359.6
Gambia, The Yes5 High High 04/20 0.6 10.2 0.4 6.4
Guinea Yes5 Moderate Moderate 12/20 0.5 70.6 0.2 29.2
Lesotho Yes5 Moderate Moderate 07/20 0.4 9.8 0.2 5.9
Madagascar Yes5 Moderate Moderate 07/20 0.3 35.5 0.1 8.5
Malawi Yes5 Moderate High 10/20 0.2 17.4 0.2 16.7
Maldives Yes5 High High 04/20 0.9 50.7 1.1 61.3
Mali Yes5 Moderate Moderate 04/20 0.5 82.5 0.3 46.3
Mauritania Yes5 High High 09/20 1.2 90.8 1.3 102.5
Mozambique Yes5 In distress In distress 04/20 1.9 292.6 1.6 250.2
Myanmar Yes5 Low Low 06/20 0.6 379.9 0.5 359.3
Nepal Yes5 Low Low 05/20 0.1 24.8 0.1 21.3
Niger Yes5 Moderate Moderate 10/20 0.2 26.0 0.2 24.0
Pakistan3 Yes5 … … 1.3 3645.4 0.9 2487.8
Papua New Guinea Yes5 High High 06/20 1.3 326.9 0.1 26.3
Samoa Yes5 High High 04/20 1.1 9.5 1.0 8.4
Sao Tome and Principe Yes5 In distress In distress 07/20 0.4 1.6 0.7 2.8
Senegal Yes5 Moderate Moderate 04/20 0.6 139.2 0.4 97.7
Sierra Leone Yes5 High High 06/20 0.2 8.1 0.2 6.9
St. Lucia3 Yes5 … … 0.2 5.2 0.1 3.1
Tanzania Yes5 Low … 01/18 0.2 138.6 0.2 109.6
Togo Yes5 Moderate High 04/20 0.5 26.6 0.4 23.9
Tonga Yes5 High … 01/18 1.2 6.3 1.2 6.2
Uganda Yes5 Low Low 05/20 0.2 91.1 0.3 107.0
Zambia Yes5 High High 07/19 0.7 165.4 0.8 184.0
Burundi Yes High … 03/15 0.1 4.5 0.1 2.8
Fiji3 Yes … … 0.2 13.4 0.2 13.3
Grenada Yes In distress In distress 04/20 0.7 8.0 0.4 5.1
Guinea-Bissau Yes Moderate … 06/18 0.1 2.1 0.1 1.7
Kenya Yes High High 05/20 0.7 630.8 0.7 620.3
St. Vincent and the Grenadines Yes High High 05/20 0.5 4.1 0.4 2.9
Tajikistan Yes High High 05/20 0.8 63.8 0.6 50.3
Yemen, Rep. Yes … … 0.9 211.5 0.6 137.7
Bangladesh No Low Low 05/20 0.1 331.9 0.1 290.8
Benin No Moderate Moderate 12/20 0.1 16.1 0.1 15.2
Bhutan No Moderate … 10/18 5.8 145.4 9.9 248.2
Cambodia No Low Low 12/19 0.8 219.2 0.8 209.2
Ghana No High High 04/20 0.6 377.9 0.3 180.2
Guyana No Moderate Moderate 08/19 0.3 16.9 0.3 13.6
Haiti No High High 04/20 0.9 76.2 0.7 59.6
Honduras No Low Low 06/20 0.4 102.0 0.1 27.5
Kiribati No High High 01/19
Kosovo3 No … … 0.1 7.5 0.0 3.9
Kyrgyz Republic No Moderate Moderate 03/20 0.6 52.1 0.6 49.5
Lao PDR No High High 08/19 1.7 315.0 1.5 277.6
Liberia No Moderate High 12/20 0.1 2.3 0.1 2.2
Marshall Islands No High … 09/18
Micronesia No High High 08/19
Moldova No Low Low 04/20 0.2 23.2 0.2 19.9
Mongolia3 No … … 0.5 69.9 0.4 60.4
Nicaragua No Moderate Moderate 11/20 0.3 33.0 0.2 20.0
Nigeria3 No … … 0.0 123.5 0.0 155.2
Rwanda No Moderate Moderate 12/20 0.1 13.2 0.1 11.7
Solomon Islands No Moderate Moderate 06/20 0.1 1.5 0.0 0.7
Somalia No In distress In distress 11/20 0.0 1.7 0.0 1.4
South Sudan No High High 11/20
Timor-Leste No Low Low 03/19 0.0 0.0 0.0 0.0
Tuvalu No High … 06/18
Uzbekistan No Low Low 05/20 0.4 257.3 0.4 217.5
Vanuatu No Moderate Moderate 06/19 0.7 6.2 0.7 6.1
Table above reflects data up until 11 March, 2021. DSSI table source: World Bank (click link to view an up-to-date table). 

 

1Estimated debt-service payments owed to all official bilateral creditors as per the World Bank Debtor Reporting System (DRS) and International Debt Statistics definitions and classifications. Estimates are derived from monthly IDS projections based on end-2019 external public and publicly guaranteed debt outstanding and disbursed. Data for South Sudan, Micronesia, Tuvalu, Kiribati, and Marshall Islands are not available. GDP data based on Oct. 2020 WEO. The full IDS database is available here.

2Reflects published DSA ratings as of end-December 2020.

3Not covered under joint Bank-Fund Debt Sustainability Framework for Low-Income Countries.

4IDA countries as of FY 20, and Angola

5 Reflects if a country has requested participation in 2020 and 2021. 

Related

Tags: Angoladebtdebt defaultDebt Service Suspension InitiativeDevelopment Finance InstitutionsDFIDSSIEconomyFeatureFinanceG20G20's Common Framework for Debt Treatments beyond the Debt Service Suspension Initiative (DSSI)IIFIMFInstitute of International FinanceMozambiqueMozambique Angola likely to join G20's Common Framework to restructure debt - IIFRafael Carvalhosovereign debtWorld Bankанголамозамбикأنغولاموزمبيقアンゴラモザンビーク安哥拉莫桑比克
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Rafael Carvalho

Rafael Carvalho

Currently the Managing Editor of furtherafrica.com, I am passionate about writing, in its myriad forms. As I started writing and editing content about Africa, I came to the realisation that, just like our ancestors hailed from the motherland, so is the future, too, very much African-oriented. Join me then, as we learn more about a future that is welcoming, multicultural and full of promise. The future that is Africa.

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