Economy
WB president nominee backs debt relief for poor countries
Thursday March 09 2023
Ajay Banga, the United States nominee to the World Bank president post. FILE PHOTO | AFP
Ajay Banga, the United States nominee to the World Bank president post has backed the G20 Common Framework to hand relief to countries with heavy debt burdens such as Kenya.
Banga who has been on a tour of World Bank member countries made a stop in Nairobi on Wednesday where he was expected to meet Kenyan authorities including officials from the National Treasury and the Central Bank of Kenya (CBK).
Read: World Bank warns Kenyan banks on sovereign debt risk
“As a banker and a student of finance, we have to follow that framework. We don’t even know the full debt burden of different countries. We need to bring all parties involved in the debt including bilateral partners to the table. We cannot do this without the people who have created the debt in the discussion,” he said.
The G20 Common Framework for debt treatments is an initiative launched in 2020 and primarily pushed by the International Monetary Fund (IMF) as a successor to the lapsed Debt Service Suspension Initiative in, which Kenya was a participant.
The Common Framework seeks to bring aboard official creditors and bilateral, and private creditors into debt restructuring discussions on comparable terms with the view of restoring debt sustainability for debt-distressed countries.
The IMF expressed frustrations on the delayed utilisation of the tool with only four countries applying for relief under the framework so far in Chad, Ethiopia, Zambia and Ghana.
“In part, these delays reflect the problems that motivated the creation of the common framework in the first place. These include coordinating Paris Club and other creditors, as well as multiple government institutions and agencies within creditor countries, which can slow down decisions,” the IMF had said in a statement issued in December 2021.
Kenya is yet to consider the common framework for debt relief as its debt levels remain sustainable albeit with a high risk of external debt distress and a high overall risk of debt distress.
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“Kenya’s debt is sustainable. While overall and external ratings for risk of debt distress remain high, debt dynamics are being bolstered by the fiscal consolidation under the IMF supported program,” the IMF said in its country report for Kenya in December.
