The foreign ministry spokesperson, jolie john, says that china attaches great importance to debt suspension and alleviation in africa. It is committed he says, to fully implementing the g20 debt relief initiative. Now the export import bank of china, which is essentially an official bilateral creditor, says it has signed debt suspension agreements with at least 11 african countries and other non official creditors, and have also reached consensus on debt relief with some african states. John said that china will exempt 15 african countries from interest free loans due by the end of the year and continue to promote the international community, especially the g20, to further extend the duration of the proposed debt suspension program. All right so let’s take a little deep into the details of how this ongoing wrangling of a debt relief issues might actually play out among sub saharan african economies. Ken gishenko is the ceo at mentor economics he joins me live um tonight, um ken good. To have you on the program, so let’s start with the kenyan context kenya’s one of the countries that has opted to not take part in the g20 debt suspension program, and we also don’t have a massive wall of euro bond payments that are due with the next Maturity due around 2024, but does kenya have the fiscal room to ride out this crisis? Indeed, and thank you and good evening, rama, uh you’re, very right to say the fiscal room for kenya is getting narrower by the day.

Kenya had opted out of that initiative because, according to its assessment, its terms, its terms were too restrictive, particularly given the fact that a third of kenya’s external debt is owed to private creditors. So there was a thinking that uh playing into that program might ruin kenya’s um sovereign uh ratings. Let me just jump in there a little bit much higher, because because we tend to we tend to discuss these issues. We tend to discuss these issues, but when audiences listen to us – and they wonder – wait hang on but it’s it’s, literally a debt suspension i’m, not asking you to take a haircut. So how is it that if a country asks for essentially a deferral of some of its debt obligations, that therefore has cross implications for other debt break that bit down for us? Well, that’s a good question and it does seem ironical, but each country has a different uh debt structure. Some countries have more domestic debt, um, others more have more. Foreign debt and kenya is equally split between domestic debt and external debt. Now, when you think of kenya’s uh much of kenya’s debt, china, of course, is one of the biggest credit creditors and there are a number of private creditors. So in the assessment are the feeling that, yes, you might get some relief um some stimulus from the g20 debt relief programs, but the cost according to the assessment, was too big because uh once your ratings uh uh start to go down uh their assessment was those Private creditors that kenya has largely depended on in future might not be able to extend our lines of credit in future, so it definitely must have been a tough decision uh, but i think that was a thinking, especially given the structure of the kenyan debt right.

So essentially, the basic idea here is, if i’ve borrowed money from you and another party in future. If i default on that there to even ask for deferral, that implies that my ability to pay is problematic. It’S in doubt, that’s absolutely a good way of putting it and, as i said, the death structure of different african countries is quite different. Remember, kenyan is, kenya is the third largest recipient of chinese loans, um after angola and ethiopia, so definitely kenya’s uh focus will largely be on the direction. China goes and you’ll. Remember that china has not all is not part of the paris club um of creditors, so that and the cbk governor has reiterated that you know bringing together china and russia, which are big lenders to africa into these paris club agreements, might make it easier in future. For countries like kenya to be able to opt in into these kind of programs right, let me just extend that analogy. Just a little bit isn’t part of the problem here, because we’ve seen the the world bank president david malpass, argued a little earlier that look part of the problem. As to why g20, some g20 countries are reluctant to extend this debt suspension is that they believe that it would essentially um mean that some creditor nations are not being treated on the same level playing field as others. In other words, if i borrowed money from you and then i turn around and say, look give me a break for six months.

But then i keep servicing debt to another person. I’M. Basically, not treating you in the same way isn’t that the moral hazard problem that’s playing out here. Indeed, it is a moral hazard problem and actually, if you think of it from a broader perspective, where people have argued that the entire political economy of africa has been tied to these loans coming from uh, these are european um, american and asian countries, and with that Those countries do have some sort of power so being able to relinquish that kind of power. Definitely uh sometimes is not in their best interest, but i think the bigger narrative here is um. Countries have been hard hit because of covet they’ll be unlikely able to be able to raise taxes and whether you allow them or don’t allow them chances are that they won’t be able to finance these budgets and they’ll need the money you saw zambia only two weeks Ago are defaulted on its uh international obligation, so there’s already a feeling that uh, whether they agree or not, the fiscal position of these countries is in a very dire position and it’s in the best interest of the global financial order. To be able to maintain that stability, and, i think, that’s the reason uh that they’re trying to push these arguments that david malpass just announced. Indeed, one last question for you, ken, because at the end of the day, as you pointed out, tax revenues are likely to fall.

Spending requirements, however, are still going up, but you’ve got these three different parties at play. Here you’ve got commercial creditors on one hand, you’ve got non parity club lenders like china, and then you’ve got the paris club, the united states of uk and, of course, all the other elements of that particular group. And how do we get all of these parties into one room on an agreement that they can all sign off on because it sounds like they’re all pushing in completely different directions? Well, it’s very different, it’s, very difficult uh those countries uh rarely, would be able to agree on uh such an important market. It would be very difficult because even they have different geopolitical interests um in africa. You know africa is considered to be an emerging market uh. Next to the next uh, you know youthful demographic dividends and they all want a slice of that. So it’s quite unfortunate that african countries – and i think the bigger thinking here is you know how do we start getting out of this debt? How do we start uh? Applying economics that really enable countries to be able to generate their own revenue and really reduce the level of debt uh that we have, because yes, uh countries, are free politically, but um. These debts are a major burden on the public sectors of these african countries. I think the big thinking is yes, you might try to crowd so crowding all these creditors into one room and ask them to give that relief, but i think the bigger conversation has to be.

You know how do we put africa first? How do we put people working fast and being able to be able to be self sufficient, so they don’t need loans in future, and sometimes they don’t think that second part of their conversation gets enough. Uh airtime, if they like, indeed certainly something to consider in the future ken gashinga.

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