Debt Restructuring Plans

For decades, Africa’s economic growth and access to global financial markets have been shaped—some say distorted—by international credit rating agencies like Moody's, S&P Global & Fitch Ratings. They wield huge influence, determining how much it costs African nations & #businesses to borrow money. But critics argue that their ratings are often biased, harsh, and fail to reflect Africa’s true economic potential. Now, the continent is taking a bold step toward changing this narrative with the proposed African Credit Rating Agency (AfCRA). African leaders have long criticized global credit rating agencies for applying a one-size-fits-all approach that unfairly inflates Africa’s risk profile. The result? Higher borrowing costs, limited economic growth & missed opportunities. United Nations Development Programme (UNDP) estimates that Africa has lost up to $74.5 billion due to biased credit ratings that lead to excessive interest payments and limited funding access. Countries like #Kenya, #Ghana, and #Nigeria often face downgrades triggered by economic slowdowns, political events, or even unrelated crises in other African nations. A key issue is the so-called "Africa risk premium." Despite significant economic improvements, African nations frequently receive lower #CreditRatings than counterparts in other regions with similar economic indicators. This means they pay much higher interest rates when borrowing on international markets. For example, when Kenya sought to issue a Eurobond, its risk premium spiked due to a coup in #Niger, despite the two countries being over 4,000 kms apart. Moreover, African economies face procyclical downgrades—meaning rating agencies lower their credit scores during economic downturns, making it even harder to recover. During the pandemic, global markets suffered, but #Africa faced particularly harsh downgrades, making it harder for governments to access emergency financing. These downgrades are often not reversed even after economies rebound. Set to launch soon, the AfCRA—an initiative by African Union, aims to introduce a more transparent, locally informed, and fair approach to credit ratings. Unlike Western agencies that rely on external perceptions, #AfCRA will use data that better reflects Africa’s actual economic conditions. African governments still need to improve transparency, governance, and fiscal management to boost investor confidence. But having an African #RatingsAgency could at least challenge outdated stereotypes and create a fairer financial playing field. The credibility of AfCRA will depend on its independence, rigorous methodology & ability to resist political interference. If successful, it could reduce Africa’s borrowing costs, attract more #investment, and shift global financial narratives in the continent’s favor. The world has long viewed Africa through a narrow financial lens. It’s time for Africa to define its own credit story. 🔄️ Repost to your network to educate others.

Is the Dollar’s Grip Loosening? Kenya’s Yuan Debt Swap Could Redefine Africa’s Borrowing Playbook Kenya’s bold pivot to convert $3.5 billion in Chinese railway loans from dollars to yuan is more than a numbers game. By saving $215 million annually in debt service, the government is creating fiscal breathing room at a time of rising social unrest and Gen Z-led protests. But this isn’t just about Kenya. Ghana, Zambia, and Ethiopia have already defaulted under similar pressures. Meanwhile, Hungary, Kazakhstan, and Sri Lanka are turning to yuan-denominated bonds and loans, signaling a quiet global shift away from the U.S. dollar as credit markets tighten. The yuan’s rise isn’t just symbolic — it’s strategic. For Africa, it could mean cheaper loans, diversified risk, and a stronger hand in future negotiations. If successful, Kenya’s move could mark the start of a new borrowing era — one where African economies rethink how they manage debt, hedge currency risk, and balance sovereignty with sustainability. The question remains: will this set a new precedent for debt strategy, or simply buy time before the next crisis?

Africa’s debt problem is not only how much we owe. It is who we owe. That difference can decide whether debt builds a country or slowly suffocates it. Japan has one of the highest public debt levels in the world. But most of that debt is held domestically by Japanese institutions, banks, pension funds, and citizens. That means a large part of the interest paid stays inside Japan’s economy. One part of the country pays. Another part receives. It is still debt. But the money mostly circulates at home. Now compare that to countries where a large share of debt is held by foreign creditors. Every interest payment leaves the country. Every repayment pressures foreign reserves. Every currency depreciation makes the debt more expensive. Every dollar used to repay debt competes with hospitals, schools, roads, salaries, water, power, agriculture, and industrial development. This is the trap many African countries must understand. External debt is not only a financial issue. It is a sovereignty issue. If you borrow in dollars but earn mainly in local currency, you are exposed. If you borrow externally for projects that do not generate productivity, exports, or long-term value, you are in danger. If you borrow for politics, prestige, corruption, or imported turnkey projects, you are not building the future. You are taxing the future. Debt is deferred tax. Someone will pay. And too often, the people who will pay never voted for it. Africa needs a different debt strategy. Not “no debt.” That is unrealistic. Debt can build power, roads, water systems, factories, agriculture processing, digital infrastructure, hospitals, schools, and export capacity. But debt must build productive capacity. Otherwise, it is not development. It is dependency. Africa needs three shifts. First, build local debt markets. Let citizens, pension funds, insurance companies, banks, and diaspora investors finance African infrastructure and earn returns from it. Second, limit foreign-currency debt. Do not borrow heavily in dollars unless the project can help generate dollars through exports. Third, create a real debt brake. Not a blind ban on borrowing. But a law that stops irresponsible borrowing. No hidden loans. No secret guarantees. No borrowing for recurring expenses. No foreign loans without clear economic return. No debt without public disclosure. Switzerland understood something important with its debt brake: You cannot keep pushing today’s political promises onto tomorrow’s taxpayers. Africa needs its own version, adapted to our realities. The problem is not borrowing. The problem is borrowing badly. Borrow locally when possible. Borrow externally only when necessary. Borrow in foreign currency only when it builds foreign-currency earning capacity. Borrow for productivity, not politics. Because the country that owns its debt has more room to breathe. The country whose debt is owned outside will always negotiate with pressure on its neck.

𝗖𝗼̂𝘁𝗲 𝗱’𝗜𝘃𝗼𝗶𝗿𝗲 recently completed a debt-for-development swap supported by The World Bank Group—the first using a new model jointly developed by The World Bank with the International Monetary Fund.    The operation freed up around €330 million in liquidity over the next five years, improving debt sustainability and enabling critical investments in education.    This approach shows that, when well-designed and effectively implemented, debt-for-development swaps can provide much-needed breathing room for countries facing liquidity pressures.    Learn more in my new blog co-authored with Ousmane Diagana, Pablo Saavedra and Junaid Ahmad: http://wrld.bg/ze7h50VVjbv Laurent Damblat, CFA

Here’s what often gets missed in the “Africa needs more capital” conversation: the terms matter as much as the amount. When capital flows from monthly-revenue ecosystems into seasonal markets without adaptation, friction is guaranteed, leading to higher default rates, lower returns, and less willingness to invest. Think about this: Imagine a young entrepreneur in East Africa building solar-powered cold storage for smallholder farmers. The product works. Demand is real. But her debt requires monthly repayment. Yet, her customers earn twice a year after selling their harvest. You see the problem here? Now, let's follow the money backward. Most lenders funding African businesses answer to investors from more developed financial markets, people who expect to see monthly revenues. That rhythm gets embedded in financial projections and terms. Those terms flow to the entrepreneur. Yet, her cash flowremain seasonal. Result: structural friction. The business fails not because the model is broken, but because the financing was inherited from a different ecosystem and deployed without redesign. Better financing terms mean better outcomes. For innovators. For investors. For Africa. For the world.

Zambia is quietly doing something that could reshape its financial future: rewiring its bond market to attract global capital. The copper producer has just rewritten its bond rules in line with best practice. Here is a summary of what is worth noting: *By building larger benchmark bonds, improving liquidity, introducing liability management tools, and signaling a possible 20 - year tenor, the country is moving from fragmented domestic borrowing toward a more disciplined sovereign funding strategy. *This is not just a technical debt reform - it is a strategic effort to lower borrowing costs, reduce rollover risk, deepen local capital markets, and strengthen Zambia’s case for eventual inclusion in global bond indices such as JPMorgan’s GBI-EM. *In markets, credibility is built through structure. Zambia’s latest reforms show it is beginning to understand that. Alliance Manchester Business School Vituli Musukuma, PhD Ntazana Siame Kaulule Chileshe Moono Gerald Soko Chanda Chime - Katongo Salima Nezam Temba Nonde,FCCA,FZICA,CIA, CAMS Joan Nanyangwe Mtaja

Across sub-Saharan Africa, small and growing enterprises form the backbone of economic life. They make up roughly 95% of registered businesses, contribute about half of regional GDP, and employ most of the continent’s workforce. Yet a formal financing gap of over US$330 billion prevents many of these businesses from expanding. In agriculture alone, US$160 billion in annual demand for capital meets only one-third of available supply, leaving an unmet need of US$106 billion. These enterprises stand at a critical stage. They generate steady revenue, employ dozens, and serve local markets, but they rarely access growth capital, financing between US$50,000 and US$2 million required to scale operations, strengthen governance, and compete regionally. Why this gap persists? - Transaction costs for smaller deals remain disproportionately high. - SMEs earn in local currency but often borrow in foreign currency. - Institutional mandates and minimum ticket sizes exclude smaller borrowers. - Limited financial data and reporting frameworks slow due diligence. The impact? - Job creation slows. - Local production remains underdeveloped. - Economic resilience weakens. What needs to change? Capital must adapt to the realities of African enterprises: - Revenue-based finance that aligns repayment with performance. - Blended facilities that include first-loss or guarantee layers. - Local-currency debt supported by partial-risk mechanisms. - Shared back-office and reporting systems that reduce transaction costs. And there's responsibility to take on every side. Founders can prepare by tightening governance, improving transparency, and tracking key financial metrics. Investors can design instruments that reflect the real conditions of African businesses, that are context-specific in size, structure, and currency. Intermediaries can connect both sides by structuring blended vehicles and standardizing data flows. If you deploy capital in Africa, start asking different questions. Is your fund structure fit for growth-stage enterprises? Are your instruments aligned with the currencies, realities, and timelines of African businesses? The next decade of Africa’s development will not depend on how much capital we raise but on how intelligently we deploy it.

Over 30 leading economists, former finance ministers and central bankers have issued a stark warning: debt servicing is choking African states’ ability to fund essential services. In a joint letter ahead of the IMF/World Bank meetings, they note that 32 African nations now spend more on servicing external debt than on healthcare, and 25 spend more on debt than on education. On average, African governments dedicate about 17% of state revenue to debt payments. The group proposes capping debt servicing at 10% of revenue, arguing this could free funding to bring clean water to ~10 million people and prevent ~23,000 under-5 deaths annually. They call for: • deeper debt relief for low- and middle-income countries  • reform of how the IMF/World Bank assess debt sustainability  • creation of a “Borrowers’ Club” to strengthen negotiation power for indebted nations  Sara Harcourt The ONE Campaign Laudato Si' Movement Jeff Hall Ndidi Okonkwo Nwuneli Kate Hampton Joe Cerrell Laura Brown Mark Leonard Alexia Latortue Frances Z. Brown Stewart Patrick Carnegie Endowment for International Peace Manish Bapna Rémy Rioux Koen DOENS https://lnkd.in/e3ap3tqP

A The World Bank blog by Pablo Saavedra, Ousmane Diagana, Jorge Familiar, and Junaid Kamal Ahmad (MIGA) describes debt-for-development swaps under which a country exchanges its expensive debt for cheaper debt, often supported by a credit enhancement like a guarantee, and then redirects the savings into development spending. Key points: 💰 Debt-for-development swaps can reduce debt costs and fund development. By exchanging expensive commercial debt for cheaper loans with better terms, countries like Côte d’Ivoire can redirect savings—over €330 million in this case—into critical sectors such as education. 🧾 Past swaps faced skepticism due to high costs and sovereignty concerns. Traditional models often relied on complex financial mechanisms that raised transaction costs and limited country ownership over how savings were spent, drawing criticism from debtor governments. 🛠️ A new model piloted in Côte d’Ivoire avoids these pitfalls. Developed with World Bank and IMF support, this approach channels savings through existing government projects with built-in monitoring, eliminating the need for special financial vehicles and preserving fiscal control. 🌍 The model is scalable and adaptable. It can be applied to bilateral debts and used by sub-national entities, offering a flexible tool for countries with liquidity pressures but otherwise sound debt and policy frameworks. ⚠️ Debt swaps are not a cure-all but can offer targeted relief. While not suitable for insolvent countries, well-structured swaps can create valuable fiscal space and development gains for nations under temporary financial strain. 🗒️ Blog: https://lnkd.in/gtvgTUHH 🖥️ More information on the Côte d’Ivoire debt-for-development swap: https://lnkd.in/gRxBj6Da 📒 The World Bank International Monetary Fund framework on debt-for-development swaps: https://lnkd.in/gKbYiz6R