Emmanuel OchayiThe Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva, has acknowledged the legitimacy of the debt cancellation demand made by many African countries.
However, she explained that achieving debt cancellation would necessitate a mutual agreement between debtor nations and their creditors.
With African public debt soaring to $1.8 trillion in 2022, marking a 183% increase since 2010 – a rate four times higher than its GDP growth, the urgency of the matter is clear. Georgieva noted the sluggishness of the G20 Common Framework in delivering support to countries in need but indicated that the time taken to reach creditor agreements is decreasing.
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She explained that this framework, which unites a diverse group of creditors including the traditional Paris Club creditors, new creditors such as China, Saudi Arabia, India, Brazil, and private-sector creditors, offers an avenue for debt restructuring.
Georgieva stressed the importance of maintaining the Common Framework while advocating for swifter, more efficient processes. She acknowledged the cries for debt relief from countries worldwide, particularly those suffering from debt triggered by climate-related shocks.
However, she cautioned that debt cancellation requires unanimous creditor consent, a complex task given the diverse nature of creditors in each case. Thus, a case-by-case approach is essential, with creditors forming committees to establish necessary parameters with IMF and World Bank guidance.
Georgieva also discussed the need for creative thinking to align debt restructuring and relief with the climate crisis’s impact, highlighting the IMF’s Catastrophic Containment and Relief Trust (CCRT) as an innovative approach.
This call for collaboration and innovative solutions underscores the challenges and complexities in addressing the debt crisis, especially in the face of climate-related financial burdens on developing nations.
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