THE Group of 20 major economies should team up with the International Monetary Fund and others to launch a new debt refinancing plan for low-income countries hit by heavy debt repayments, a panel of Africa experts said on November 18.
“This proposal would focus on refinancing rather than rescheduling debt obligations,” the panel said in a report released in Johannesburg, ahead of the G20 summit in South Africa this weekend.
The expert group, including a former South African finance minister and a former Kenyan central banker, said many countries now need immediate debt relief.
The mechanism could be implem ented through the creation of a special fund, or the use of debt swaps that would use more affordable financing to buy back countries’ most expensive debt.
The experts suggest that a mechanism be implemented through creation of a special fund, or the use of debt swaps
Funding could come from the use of special drawing rights at the IMF, the panel said, or the sale of the IMF’s gold, if G20 shareholders in the Washington-based Fund offer their support. The African Union is also pushing for the creation of a debt refinancing mechanism but it is not yet clear if and when the facility will start operations. South Africa set up the expert panel in March to examine what needs to be done to help heavily-indebted nations, especially in Africa.
During its G20 presidency, South Africa has tried to keep critical issues for poor countries like debt and climate change on the agenda, but it has faced stiff resistance from the U.S., which has said it will not be attending the summit.
Debtor nations should also form a borrowers’ club, the panel said, to boost collective advocacy in global finance. “Its primary mandate would be to strengthen debtors’ voices in negotiations on reforms to the international financial and debt architecture,” it said. Africa should also partner with the G20 to recommend changes to the IMF to “effectively perform its role in the global financial system, with a particular focus on Africa.”
