PANGEA-RISK (www.PANGEA-RISK.com) jointly published a white paper on THE POLITICS OF AFRICAN DEBT RESTRUCTURING, with Acre Impact Capital, on the need to prepare Africa’s distressed sovereigns for a new wave of sustainability capital.

Download the document here: https://apo-opa.info/3oL0I9h

The report finds that by 2024, many of Africa’s debt-distressed sovereigns will have successfully restructured their most unaffordable loans, whether domestic or external obligations, placing these countries in much better stead to attract private investment, in particular from sustainability-focused and impact investors to address the USD 100 billion annual infrastructure financing gap.

This forecast differs from the often-prohibitive credit ratings imposed on many distressed sovereigns, which restricts climate financing activities and other development funding in these countries.

Debt transparency, sound fiscal and monetary governance, and candid bilateral relations with creditors are the primary political indicators of effective debt treatments, even while multilateral debt relief initiatives, such as the G-20’s Common Framework, flounder. By the end of 2023, heavily indebted African states like Kenya and Ghana, should have implemented successful debt restructurings through extended maturities on foreign currency obligations, domestic loan swaps in exchange for concessional finance, and limited haircuts for some bondholders.

Chinese creditors and international bond holders are most exposed to defaults, while the shock of debt restructurings for local banks and domestic bondholders will often be cushioned. In well-managed debt treatments, concessional and private sector creditors will be least exposed to arbitrary haircuts and other losses, which will enhance sovereigns’ creditworthiness and improve their position to attract record flows of climate finance and other impact investment in coming years. For the full report, see https://apo-opa.info/3L3Qmco.