Experts press G20 to make debt relief faster and fairer

For the last five years, the G20 Common Framework has struggled to deliver comprehensive, swift restructuring agreements for the countries that need it most. It’s part of the reason why South Africa — which holds this year’s Group of 20 presidency — made debt relief a pillar of its G20 focus, including by assembling an expert panel to address the issue in Africa. “I fully agree that [the Common Framework] has not very much delivered on what it was expected to deliver,” said Daouda Sembene, a member of that expert panel and the chief executive officer of global development advisory firm AfriCatalyst. “The results are mixed, and it requires very urgent reforms that would [help the Common Framework] deliver on the promises that it had before.” Speaking at Devex Impact House on the sidelines of the World Bank and International Monetary Fund annual meetings, Sembene elaborated further. He stressed that for the Common Framework to be effective, restructuring needed to be “predictable, timely, and orderly,” and to better integrate private creditors into the debt restructuring process. “This has not been the case despite the repeated request from the G20,” he said. “We definitely need to take action quickly so that this situation is addressed as soon as possible.” Zambia, for example, applied for debt relief in February 2021 — but it only reached an agreement with creditors in June of 2023, more than two years later. Aside from Zambia, only Chad, Ethiopia, and Ghana have utilized the mechanism since its launch, and experts have criticized the framework as a “long, drawn-out process with a vague and uncertain end.” Sembene — who served as an executive director at the IMF before launching AfriCatalyst — spoke about how the Common Framework doesn’t clearly spell out how official creditors, such as governments or multilateral lenders, and private creditors, such as bondholders or commercial banks, should be treated equally and simultaneously during debt restructuring. “When a country is actually treating its debt under the Common Framework, [it should] have the possibility of having parallel negotiations between an official creditor on one hand, and a private creditor on the other hand,” he said. Right now, countries must often reach an agreement with official lenders — such as other governments or multilateral institutions — before private creditors like bondholders or commercial banks come to the table. For critics of the framework, that sequential approach is part of the reason the mechanism has led to years of delays and uncertainty. By contrast, parallel negotiations would ensure that all creditors are working from the same information and expectations, making it easier to achieve “comparable treatment” — the principle that all lenders should share the burden of debt relief fairly. “We need to find ways to incentivize those private creditors to be part of the conversation when it comes to debt restructuring, or when it comes to, really, debt resolution in general,” Sembene added. The G20 expert panel is expected to deliver a broader set of recommendations to the bloc next month, when the world’s largest economies meet for the Leaders’ Summit in Johannesburg, South Africa.