The International Monetary Fund on Thursday called on creditor committees for Chad, Ethiopia, and Zambia to quickly reach agreements with authorities to restructure the countries’ debts, saying this could unlock IMF financing programs and disbursements for them.
IMF spokesman Gerry Rice told a news briefing that the Fund has made progress in its discussions with Chad, the first country to seek help under the G20’s common framework, but that it needed a debt agreement among creditors, including mining and trading giant Glencore (GLEN.L) to unlock IMF funds.
“So, the creditor committee on Chad, we expect to continue to meet,” Rice said. “We think it’s essential, again, that the agreement be reached promptly with all creditors — including Glencore — to allow us to submit this first review under the ongoing arrangement that we have with Chad.”
A debt restructuring deal would allow the IMF to seek board approval for a review of Chad’s $571 million Extended Credit Facility agreement, which would unlock some financial support for the country, Rice said.
In June, three senior Chadian officials were arrested and fired over allegations they had embezzled money from the state oil company. The country owes one-third of its external debt burden to commercial creditors, and almost all of that to Glencore in oil-for-cash deals dating back to 2013 and 2014.
Ahead of Wednesday’s meeting of bilateral creditors, the scandal had given private creditors pause about whether to agree to further relief on oil-backed loans that had already been restructured in 2018, according to a source with knowledge of private creditor thinking.
A spokesperson for Glencore given declined to comment.
Zambia, another early debt restructuring candidate under the G20 framework, is expected to meet with its creditor committee on Monday, July 18, its finance minister said on Wednesday. If a deal on Zambia is reached, the IMF can proceed to board consideration of a new financing program after its August recess, Rice said, adding: “So we’d be looking at probably around early September for that, again, provided that these steps are taken.”
In Ethiopia, he said that the IMF next week will meet with the East African country’s creditor committee to provide an update on its economic situation, but declined to comment on the impact on debt talks from Ethiopia’s continuing civil war.
IMF Managing Director Kristalina Georgieva told Reuters last week it was crucial to jumpstarting a process that had failed to deliver a single result thus far, given worsening debt problems facing developing countries and even nations with middle-income economies.
The G20 Common Framework was launched in 2020 and designed to streamline debt restructuring efforts in the wake of poorer countries buckling under the fallout from the COVID-19 pandemic. However, progress so far has been glacial, and IMF and World Bank officials have been blunt about the failings of the Common Framework. They are pushing for finance officials of the G20 major economies to apply more pressure on China and private sector creditors to participate.
Ethiopia Creditors to Discuss Debt Restructuring on Monday
Ethiopia’s creditors’ committee will meet on Monday, a source briefed on the matter said on Tuesday, moving the cash-strapped African country a step closer to restructuring its debts under a common framework set up by the Group of 20 economies. The committee, which is co-chaired by France and China, first met in September 2021, but progress on debt relief for Ethiopia has been complicated by a 20-month insurgency that began in the northern Tigray region.
According to Walta Information Center, the meeting will move the country a step closer to restructuring its debts under a common framework set up by the Group of 20 economies. The International Monetary Fund, the World Bank, and other financing parties are pushing China and private creditors to accelerate work on debt treatments sought by Ethiopia, Chad, and Zambia after glacial progress over the past year and a half.
“Ethiopia’s creditors will meet on Monday,” said the source, providing no further detail according to the report filed by the international news agency.
In Tokyo on Tuesday, U.S. Treasury Secretary Janet Yellen also called for an “orderly resolution of sovereign debt distress.” The issue will be a focus at this week’s meetings of the G20 financial officials in Bali, Indonesia. John Denton, secretary-general of the International Chamber of Commerce, warned G20 finance ministers that, according to recent private sector estimates, more than two dozen countries were at risk of defaulting in 2022.
The war in Ukraine had compounded problems facing many developing countries by driving up food, fertilizer, and energy prices, Denton said in a letter addressed to the ministers.
“We see a real risk of solvency problems creating a systemic developing country debt crisis. This must be avoided at all costs given the severe downside risks such a scenario would create for trade and the global economy as a whole.”