With the Nigerian government ruminating over the idea of debt restructuring, the International Monetary Fund (IMF) has said, it is in discussion with creditors on finding parameters that would align debt restructuring, debt relief with the impact of the climate crisis.
Much of African countries' debt has moved from traditional creditors such as the Paris Club, to new creditors such as China and a very diverse group of private creditors, with many struggling with debt servicing and bowed under the heavy debt burden.
Nigeria is part of the countries currently struggling with debt as servicing of the country's obligation is gulping nearly all of its revenue. According to the latest report from the Debt Management Office (DMO), Nigeria's total debt servicing expenditure reached N2.34 trillion over a six-month period.
This is as total debt of the country stood N87.38 trillion in the second quarter of this year. According to IMF, Nigeria is among the five countries that account for 55 percent of official bilateral debt to China.
Speaking at the Press Briefing on the Global Policy Agenda, the IMF managing director, Kristalina Georgieva, noted that, the Fund and the World Bank are working on speeding up the common framework on debt restructuring.
Georgieva, whilst responding to questions on debt cancellation said: "I say be firm and relentlessly pursue the objective of delivering for the countries that need debt restructuring, easing of the burden of debt. The Common Framework is new, and it brings together a very diverse group of creditors, the traditional creditors, the Paris Club, but then new creditors, China, Saudi Arabia, India, Brazil, the Emirates, and a very diverse group of private creditors.
"We have seen in the past, it has taken quite a long time for the Paris Club to fully codify the way it functions. So, my plea is pressure, pressure for speed and efficiency, but do not throw the towel of the Common Framework because if we lose it, then we are back in a much less predictable environment.
"I do hear the legitimate calls of African countries, not only African countries, but countries also all over the world that are burdened by debt, especially painful to see when some of this debt is because of climate-related shocks, because of a problem these countries have done nothing to create. But we need to assess objectively and realistically. Debt cancellation requires all creditors to agree.
"Having the concomitant of creditors and their different configuration in every single case makes this excruciatingly difficult. And therefore, a case-by-case approach, when we identify the creditors, creditors come together, form a Creditor Committee, and then we as institutions, the IMF together with the World Bank, we provide the parameters of what they need to agree on. This is today the way debt restructuring is delivered.
"Consensus is growing around difficult issues, such as cutoff dates, comparability of treatment between official and private creditors, as well as how we handle the process of debt restructuring in a timelier manner. We believe it is important also at these meetings to demonstrate we are capable to expand the voice of emerging markets and developing countries at the Fund.
"We also have to think about how we can better align debt restructuring, debt relief with the impact of the climate crisis. We at the IMF, we are doing some work in this area. It is not easy, but that kind of thinking of a solution that may not have existed before that can help countries obviously is something we must all pursue.
"We have created a very important avenue to accelerate debt restructuring. It is called the Global Sovereign Debt Roundtable. It is hugely important because for the first time since the debt landscape has changed, the creditor landscape has changed dramatically, we have the traditional creditors, Paris Club, the new creditors, China, Saudi Arabia, Brazil, India, the private-sector creditors represented at the roundtable, and very important, representatives of the debtor countries.
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"The Common Framework has been slow to deliver to countries that turn to it for support, but we see an encouraging sign that the time taken to reach an agreement among creditors is shortening with every step. It took 11 months for Chad, for the creditors of Chad to provide the Fund with financial assurances needed for us to help the country. So, from our Staff Level Agreement to going to the Board, 11 months. It took nine months for Zambia; six months for Sri Lanka; five months for Ghana. And now we have discussions ongoing on Ethiopia, and I hope this trend will be sustained.
