IMF clashes with Africa’s creditors over debt relief

In depth
This article is part of the dossier: Africa and the economic storm

By Julian Pecquet
Posted on Friday, 14 October 2022 18:14

IMF African Department Director Abebe Aemro Selassie reacts at the headquarters of the IMF during the group's Annual Meetings in Washington, U.S., October 13, 2022. REUTERS/James Lawler Duggan

The IMF’s top Africa official today pressed the continent’s creditors not to use rising oil prices as an excuse to turn their back on debt relief for cash-strapped energy exporters.

The remarks from IMF African Department Director Abebe Aemro Selassie come one day after the Paris Club of official creditors announced that rising oil revenues meant that Chad is no longer in need of immediate relief from bilateral creditors. The IMF approved a three-year, $570m programme for Chad last December.

“The creditor committee examined the latest developments on the macroeconomic and financial situation of Chad and noted that no debt relief from official bilateral creditors is currently needed given the surge in oil prices since the approval of the IMF upper credit tranche (UCT) program by the Executive Board on December 10, 2021,” the Paris Club said in a 13 October statement.

‘Common Framework Initiative’

Chad is one of three countries along with Ethiopia and Zambia that has been negotiating with creditors under the G20’s so-called Common Framework initiative launched in November 2020 to help cope with the economic fallout from the Covid-19 pandemic. Anglo-Swiss mining giant Glencore accounts for more than 98% of the country’s $1bn in commercial debt, the country has said.

Selassie called the delay in getting debt relief “really very problematic.”

But we want to make sure that the resources we provide will go to support Chad rather than address an unsustainable debt situation.

“Chad is in an extremely, extremely difficult situation now,” Selassie told reporters at a press conference tied to the release of the fund’s biannual Regional Economic Outlook for sub-Saharan Africa. “I was there in May, and really it was heart-wrenching to see how the country has been impacted by the pandemic and an awful drought last year, which has driven the country really to the edge.”

Selassie went on to suggest that the IMF’s assistance and rising energy revenues should not be used to prioritise bilateral creditors when pressing needs including massive food insecurity remain.

“In these circumstances, the delay by Chad’s creditors in approving the much-needed debt relief has been really very problematic,” Selassie said. “From the IMF side, we have an arrangement with Chad where we provided some disbursements and are hoping to provide more disbursement. But we want to make sure that the resources we provide will go to support Chad rather than address an unsustainable debt situation.”

‘Chad still needs debt relief’

Debt relief advocates were quick to endorse the IMF official’s remarks.

“The IMF is right that Chad still needs debt relief,” said Tim Jones, the head of policy at Debt Justice UK, who is attending this week’s annual meetings of the IMF and World Bank in Washington. “It has to find a way for Chad to be able to stop paying the Glencore consortium, as this is the way to force Glencore to negotiate, and ensure IMF loans are not used to fuel the lenders’ profits.”

While Selassie acknowledged that “it is true that higher oil prices stand to benefit Chad” in the future, he said that the benefits of a hike in revenues “should accrue as much to Chadian people as much as its creditors.”

“Debt relief for Chad remains a very important component of how the country can be helped in the coming months and years,” he said.

More broadly, Selassie said, the issue of debt sustainability remains a key concern for the continent.

“When debt becomes unsustainable, it’s unfair for a country to continue to repay it. Because it will cause all kinds of economic difficulties, it will use resources that could otherwise be used elsewhere. And ultimately, when debt is unsustainable, it becomes unpayable.”

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