By Sylvia Chebet
The June 22-23 Paris Summit on New Global Financing Pact has yielded some fruit.
The International Monetary Fund (IMF) has created a new instrument called the Resilience and Sustainability Trust, which would offer longer debt-repayment period.
“For the first time in our history, we are offering long-term financing – with a 20-year repayment period and a 10-year grace period. And we are providing financing to vulnerable middle-income countries on concessional terms” Kristalina Georgieva, the Managing Director of the IMF, said at the Paris summit on Friday.
Kenyan President William Ruto, who had proposed a 50-year debt repayment plan for developing economies, describes IMF’s latest pronouncement as “good progress.”
Debt restructuring
In a statement seen by TRT Afrika, Ruto said: “The reform conversation is picking momentum to eliminate the biases and engineer a mechanism to tackle debt distress.”
At the French summit, Zambia struck a landmark deal to restructure its $6.3 billion debt acquired from several countries, including China. The deal would see the nation’s debt obligations staggered up to 2037.
Reforms on the IMF’s Special Drawing Rights (SDRs) was another key priority for African leaders.
“We have also promised to help re-channel SDRs. So if countries in strong reserve positions that receive SDRs don't need them, they should lend their SDRs to others”, Georgieva said.
Push for changes
African countries have been pushing the IMF to review its laws on the SDRs in order to make credit more available.
The SDR is a system used by the crisis lender to set loan quotas. Countries with more drawing rights have access to more credit than those with fewer rights.
African finance ministers have argued the SDR allocation model used by the IMF is oblivious to the current economic needs of developing nations, because richer nations with higher drawing rights “hardly borrow loans from the IMF.”
During the 2021 general SDR allocation of $650 billion, high-income countries, which are unlikely to utilise SDRs, received approximately $450 billion, nearly 70% of the total allocation.
Africa, with a population exceeding 1.4 billion, received fewer SDRs than Germany, a country of 83 million people.
