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A report on debt restructuring under the Group of 20 (G20) Common Framework has highlighted numerous shortcomings characterised in the initiative such as exclusion of developing countries whose sovereign debts are highly unsustainable.
The study report on Debt Restructuring under the G20 Common Framework & Alternative Policy Solutions was released by the African Forum and Network on Debt Development (AFRODAD) last week.
Key highlights of the report were that the framework did not make room for debt write-offs and outright cancellations and like the Debt Service Suspension Initiative (DSSI), there was no room for middle-income debt-distressed countries.
In addition, the framework had no room and strategies for distressed middle-income economies with no offers or minimal prospects for their debt reform.
“To complicate matters, there is a lack of transparency in the public debt sustainability analysis and credibility of the data on which international debt policies are based.
“For many low-income countries struggling to access large pools of international finance, signing up for the Common Framework will be bad news and potentially disastrous,” according to the study.
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The study underscored that the G20 was a collection of diverse groups of creditors with contradictory objective.
It stated that the official creditors, such as China, private creditors like Glencore, international bondholders, Paris Club, and the G20 membership all had different views.
According to the study, some of the creditors were unwilling to restructure debt if they believe a first move will serve the interests of other creditors.
“The G20 CF is a barrier rather than a facilitator of debt restructuring in Africa, and the benefits of joining are minuscule compared to the cost,” the study showed.
As part of the solutions, the study suggested reformation of the existing financial and monetary architecture to end the debilitating financial commitments of developing countries.
Such a reform should be conditional on incentives created for ending public external debt on the part of both debtors and creditors.
In the report, AFRODAD recommended that minimalist reforms such as the G20 should be rejected for their unfair, ad hoc, and disordered nature, and a new, comprehensive, and effective sovereign debt restructuring mechanism.
“The discussions on the debt relief needs urgent attention that addresses the power asymmetry. We have seen how these asymmetries play out in the G20 Common Framework” AFRODAD Executive Director, Jason Braganza said.
United Nations and Chair of the United Nations Sustainable Development Group Deputy Secretary-General, Amina Mohammed, said: “There is no reason not to act and yet, the international community is not finding common ground; the G20 in particular remains at an impasse.”
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