South Africa avoiding international debt plan

South Africa made it clear it wasn’t seeking any type of debt suspension to fight the coronavirus pandemic, with such measures likely hurting more than they would help due to the high domestic ownership of securities.

“There are a few countries, such as Egypt and South Africa, that aren’t among those” seeking to be involved in debt standstill talks being coordinated by the Institute of International Finance, special envoy Trevor Manuel said in response to emailed questions. “South Africa has primarily borrowed from domestic capital markets.”

While South Africa isn’t eligible for the G-20 plan, as it doesn’t belong to the world’s 73 poorest nations, Manuel’s arguments highlight the risks some countries need to consider when asking for a deferral of obligations.

Meanwhile, Zambia, which has hired Lazard to advise on a potential debt restructuring, has made an official request to the Paris Club to suspend payments on official obligations.

Key Developments:

  • A G-20 initiated plan to suspend debt payments for low-income nations is likely staying within the bounds of official loans, as governments stay clear of the default risk from renegotiating Eurobonds
  • 31 countries, including 22 in sub-Saharan Africa, have applied to the Paris Club of official creditors as of last week
  • With a recovery in global risk appetite, many nations may not need immediate help and will opt to raise new funds as markets re-open
  • The medium-term outlook remains dire for countries carrying the burden of a decade-long debt binge

Earlier:

  • China said it has signed off on a debt suspension for 77 nations as part of the G-20 deal and has pledged to provide $2 billion to help countries respond to the pandemic
  • Ghanaian Finance Minister Ken Ofori-Atta has campaigned for a longer debt suspension of three years, with African economies unable to replicate the money-printing stimulus of developed nations

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South Africa avoiding international debt plan