Event: Creditor Coordination vs Borrower Coordination: What Matters Most to Debt Management in Africa? DR and CGD Panel Discussion

Creditor coordination vs. borrower coordination: What matters most for debt management in Africa?

The international financial system is too creditor-centric and does not take into account the needs of borrowers. Creditors are often organized through “clubs” or “committees”, such as the Paris Club, which exclude borrowers from negotiations. Therefore, there is an urgent need to strengthen borrower coordination so that countries can share experiences and negotiate practices to gain more benefits from the financial system. Such coordination can be achieved through borrower clubs, where African countries can come together to both borrow and negotiate debt terms. Key aspects are highlighted in the text box below.

The Borrowers’ Club will be of great benefit to Africa in multiple ways. For example, when African governments come together to borrow, they will be able to access credit, thereby facilitating the start-up and continuity of projects as low-interest loans are available. In addition, coordination between African governments will continue to improve, while also providing a platform for sharing ideas and experiences. Given the key stakeholders present at the Annual Meeting, this is a great opportunity for African leaders and development practitioners to raise the need for borrower coordination in the international financial system – making the system work for borrowers, not just creditors.

Borrowers Club:

• • Borrowing countries meet regularly to determine member countries’ priorities based on clear eligibility criteria;

• • The borrower designates one or more representatives to interact with creditors, who may take turns serving as representatives;

• • The borrower will appoint an independent trustee based on certain criteria such as its capital or reputation;

• • The borrower begins making equal small, low-interest periodic payments to the independent trustee as soon as possible;

• • To facilitate repayment, the repayment amount is smaller and the interest rate is lower, while also being sufficient to build a “cushion” for temporary collateral;

• • Borrowers independently implement projects, monitor and evaluate results, and meet regularly to hold each other accountable for progress and agree on new projects;

• • The Borrower Committee must agree to provide a buffer fund for temporary support if projects are delayed, face challenges, or if borrowers face repayment challenges;

• • Borrowers who default on their loan payments are unable to obtain further loans.

Speaker: Hannah Ryder, CEO, Development Reimagined

Moderator: Gyude Moore, former Minister of Public Works of Liberia and Senior Policy Fellow at the Center for Global Development

Panelists:

• • Daouda Sembene, Non-resident Fellow, Center for Global Development and former Executive Director, International Monetary Fund
  • Maia Colodenco, former Director of International Affairs, Ministry of Economy, Argentina
  • Olivier Pognon, Director and CEO, African Legal Support Agency (to be confirmed)
  • Bogolo Kenewendo, Director of Climate Champions Africa, former Minister of Investment, Trade and Industry of Botswana, Non-resident Fellow at the Center for Global Development
  • Paulo Gomes, Chairman of Orango Investments and former Executive Director of the World Bank

This event was co-hosted by CGD and Development Reimagined. 
October 2022