Improving debt transparency remains a critical challenge. Significant gaps persist in cash flow forecasting and cash balance management, and loan guarantees and on-lending derivatives.
There has been some progress, although slow, in the process of Legal Framework debt relief through the Managerial Structure 80% Debt Records Common Framework for Debt Management 60% Segregation of Duties, Staff Debt Treatments beyond Strategy Capacity and BCP 40% the DSSI. Official bilateral Debt Reporting and Debt Administration and 20% creditors reached a Evaluation Data Security preliminary agreement on 0% Cash Flow Forecasting and Chad’s debt restructuring in Audit Cash Balance Management June. Acceptance of debt Loan Guarantees, on Coordination with restructuring under the Lending Derivatives Fiscal Policy Common Framework terms External Borrowing Coordination with Monetary Policy and conditions is awaited Domestic Borrowing from private creditors Source: World Bank. to allow the process to Note: Share of Sub-Saharan African countries that meet the minimum requirement. move to its conclusion. On September 16, 2021, Ethiopia’s creditors’ committee held its first meeting to discuss the country’s debt restructuring under the Common Framework. Subsequent meetings will determine the amount of debt to be restructured and the treatment of the private sector debt. The Government of Ethiopia has also officially requested an IMF program for which debt sustainability will be a precondition.12 FIGURE 1.24: Debt Recording Dimensions and Share of Countries That Meet the Requirement
The IMF approved a general allocation of Special Drawing Rights (SDRs) equivalent to US$650 billion (about SDR 456 billion) in August 2021, to address the long-term global need for reserves, build confidence, and foster the resilience and stability of the global economy. About US$275 billion (about SDR 193 billion) of the new allocation will go to EMDEs, including low-income countries, and it will particularly help vulnerable countries reduce their reliance on more expensive domestic or external debt. After reaching record levels in April, sovereign spreads declined notably, particularly in countries with high debt-to-GDP ratios, such as Zambia and Angola. The risk of default subsided in Zambia after the country started negotiating a program with the IMF. Sovereign bond yields declined further upon the election of opposition leader Hakainde Hichilema. Market participants expect the new president to accelerate market-friendly reforms, adopt sound macroeconomic policies, and put emphasis on fighting corruption, enhancing transparency, and striking a deal with the IMF. As a result, the kwacha appreciated by 19 percent against the US dollar. Similarly, sovereign spreads in Angola retreated from their high levels in April due to fiscal consolidation efforts (as reflected by a reduction in nonessential expenditure) and prospects of a persistent rise in oil prices. In Ghana, sovereign bond yields increased as public debt rose to 77.1 percent in June. Domestic currencies in the region depreciated against the US dollar in July, except for the Zambian kwacha (figure 1.25).
12 Details on the features and participation of African economies on the Common Framework as well other mechanisms of debt relief such as the Debt Service Suspension Initiative (DSSI) and the Sustainable Development Finance Policy (SDFP) are provided in Africa’s Pulse volume 23.
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