admin
Bloomberg
Three central banks from the Group of 20 developed nations have expressed interest in underwriting a special-purpose vehicle that would allow African countries to reduce their immediate debt burden without the risk of default, according to a United Nations body.
According to the financial construct, nations would exchange their debt for new concessional paper issued by the vehicle and backed by top-rated institutions. That would allow some of the poorest countries to channel scarce funds to fight the pandemic while staying current on obligations to private creditors.
“We have at least three countries that are interested but we’re trying to bring them together to form a group,” Vera Songwe, the executive secretary of the UN Economic Commission for Africa said in an interview. The special-purpose vehicle is being designed by the UNECA, African Union and African finance ministers.
Songwe declined to name the central banks with talks still ongoing but said there was hope for progress on the matter before the summer.
The potential debt exchange is similar to the 1980s Brady plan that converted bank loans mostly owed by Latin American countries into new securities backed by US Treasuries.
The proposal has been put forward as a way to allow private creditors to join a debt relief plan for low-income countries that have been pushed to the brink of insolvency in the pandemic. The G-20 group of nations has already pledged to suspend payments on official loans this year.
Online Reporter