Creditor Coordination vs Borrower Coordination: What Matters Most to Debt Management in Africa?
The international finance system is overwhelming creditor centric and is not considerate of the borrower’s needs. Creditors are often organised through “club” or “committees”, such as the Paris Club, which exclude the Borrower from negotiations. Subsequently, there is an urgent need to increase Borrower Coordination for countries to share experience and negotiate practices to get more out of the financial system. Such coordination can be achieved through a Borrowers Club, where African countries club together to both takeout loans and negotiate debt terms. Key aspects are highlighted in the text box below.
A Borrower’s Club would be highly beneficial to Africa in more ways than one. For example, when clubbing together to take out loans African governments will have access to credit that will bolster project initiation and continuity as there is the availability of low-interest loans. Further, coordination among African governments will continue to improve while also providing platforms to share ideas and experiences. Given the key stakeholders in attendance at Annuals, it is a strong opportunity for African leaders and development practitioners to raise the need for borrower coordination in the international financial system – to make the system work for Borrowers, not just Creditors.
The Borrower’s Club:
- Borrowers meet regularly to determine priority projects for the members, based on clear eligibility criteria;
- Borrowers appoint a representative(s) to interact with creditors and this can be on a rotational basis;
- Borrowers will appoint an independent trustee based on certain criteria such as its capital or reputation;
- Borrowers as quickly as possible begin to make equal small, low-interest regular payments to an independent trustee;
- The repayments are designed to be small with low-interest rates for ease of payment while also sufficient to build in a “cushion” for temporary collateral;
- Borrowers deliver their projects independently, monitor and evaluate results and meet regularly to keep each other accountable for progress and to agree on new projects;
- If a project is delayed, faces challenges or a borrower faces repayment challenges, the borrower committee must agree for the cushion to be made available to support temporarily;
- Borrowers in arrears do not get more loans.
Speakers: Hannah Ryder, CEO of Development Reimagined
Moderator: Gyude Moore, former Minister of Public Works, Liberia and Senior Policy Fellow at Center for Global Development
Panelists:
- Daouda Sembene, Non-Resident Fellow at the Center for Global Development and former Executive Director of the IMF
- Maia Colodenco, former Head of International Affairs at Ministry of Economy of Argentina
- Olivier Pognon, Director & CEO of the African. Legal Support Facility (TBC)
- Bogolo Kenewendo, Africa Director at Climate Champion, former Minister of Investment, Trade and Industry of Botswana, and Non-Resident Fellow at the Center for Global Development
- Paulo Gomes, Chairman at Orango Investment Corporation and former Executive Director at the World Bank
This event is co-hosted by CGD and Development Reimagined, watch the full webinar below.