The Republic of Chad has emerged as the first country to take the bold step of debt restructuring under the G20 “Common Framework for Debt Treatment beyond the DSSI”. This move comes amidst increasing calls by civil society organisations for debt restructuring to provide the fiscal space required by low-income countries to deal with the economic downturn of the covid-19 pandemic and to accelerate progress towards the realisation of SDGs and national development plans. When approved by the IMF Board, Chad’s request will be one of its three major debt workouts in less than a decade – the others being workouts under Enhanced HIPC which Chad attained its completion point in 2015 and a private debt workout with UK-listed commodity giant, Glencore, that schedules debt repayments up to 2026. The explicit terms and conditionalities of the workout are not yet clear but the restructuring process will be guided by non-legally binding MOUs negotiated with individual creditors. Chad’s move is a likely precedent for other African countries already faced with record-high debt levels – a tight situation already compounded by the economic slowdown created by the outbreak of the COVID-19 pandemic, poor performance of commodities in the global market and weak domestic resource mobilisation in Africa. The G20 Framework is a welcome arrangement but the best outcome will be achieved through win-win transparent negotiations accompanied by prudent financial management and the institution of fiscal discipline by African governments.
“Restructuring and Moratoriums are sounding bells of all not being well beneath the surface. The complicated nature of this particular crisis is that its trigger is a health pandemic and not a conventional commodity bust nor a financial crisis. Mechanisms in place are still short-term and do not address the core faults in the global financial architecture nor the flawed debt financed mega-infrastructure approach to development. Beyond the current initiatives, resetting how the global economy works should address systemic bad behaviour that induces profiteering from indebtedness, the generation and movement of illicit financial flows and holding to account private agents for their deceitful behaviour that undermines tax revenue generation thus creating fertile ground for debt.” Jason Braganza, Executive Director, AFRODAD.