The Chief Executive Officer of Ecobank Transnational International (ETI) has warned that calls for debt cancelation by some African countries in the wake of the covid-19 spread across the continent may come to haunt the continent if acceded to by the creditors. Adding that the idea of African countries seeking debt cancellation from multilateral institutions, bilateral lenders, and international financial organizations will backfire.
Ade Ayeyemi speaking recently said that canceling the debt of heavily indebted African countries would only come back to haunt them. “Forgiveness is not helpful because your debt is somebody else’s savings. When you go to the market to borrow money, the market is looking at your current and past behavior.”This view was also corroborated by the Chief Executive Officer of Kenya’s largest bank, Equity Group Holdings, James Mwangi, who said that forgiveness was a form of default, which distorted markets. He pointed out that the call for debt forgiveness was one area where the continent should be conscious of the unintended consequences.
It can be recalled that in April, African Finance ministers asked for debt relief from multilateral Institutions like the International Monetary Fund, World Bank and the European Union amid the coronavirus crisis. The African countries who asked for immediate relief from debt service obligations from these multilateral institutions including the G20, canvassed for a portion of their debt to be forgiven or converted into long term, low interest loans. This is to help free up funds for the more than 50 poor African countries to deal with the coronavirus pandemic.
It could be recalled that China, to exempt some African countries from repaying their interest-free loans that are due at the end of 2020. It also expressed its willingness to provide further support, including loan maturing extensions, to free up funds needed to deal with the pandemic.
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry