Towards Building a Fair and Orderly International Framework for Sovereign Debt Restructuring: An African Perspective
The recent history of Sovereign Debt Restructuring (SDR) undoubtedly demonstrates the need for a reform of the international financial architecture. Not only have financial crisis and sovereign default become problems affecting developed and developing countries alike, these phenomena have also recast the focus on the question of whether SDR should be guided by a more formal process. In the African context, despite multilateral initiatives to provide debt relief, including the Paris Club, Heavily Indebted Poor Country program (HIPIC) in 1999 and the Multilateral Debt Relief Initiative (MDRI) in 2005, countries are again coming dangerously close to unsustainable levels of debt they had prior to these initiatives and some are already facing distress. For Sub-Saharan Africa (SSA), not only is sovereign debt on the increase, but its nature of the debt is changing as countries turn to capital markets for funding and new bilateral partners such as China. On the African front, restructuring of debt has always been a contentious issue especially in the context of official debt; however several African countries are now experiencing difficulties with the repayment of other types of debt, including bond debt and commercial debt. As such, with the changing landscape on the continent, the risks associated with the lack of a uniform international approach, reforming SDR is very much a priority issue for African countries, as it is for other developing countries like Argentina and developed counties. Among the complex questions that international policy makers, governments and Civil Society Organizations (CSO) like AFRODAD now seek to answer is: how should future SDRs be conducted in a way that balances the interests of both debtors and creditors and that alleviates present flaws in the system? In light of the above question, the objective of this paper is to explore the current challenges; current innovations that affect SDR and global reform proposals to create a new framework for SDR. The paper will also focus on the special circumstances of African countries and will subsequently provide food for thought from an African civil society perspective regarding these issues as a way to move the debate forward.