African diplomats urge UK government to back bill to accelerate debt restructurings

African diplomats from eight southern and east African countries have urged the UK government to support a private member’s bill aimed at speeding up debt restructurings for struggling nations, The Guardian reported. Economic crises, including the pandemic, the war in Ukraine, and rising US interest rates, have made international loans unaffordable, leading to defaults in countries like Zambia, Sri Lanka, and Ghana since 2020.

The bill, introduced by Labour MP Bambos Charalambous, seeks to prevent private creditors from suing countries during debt relief negotiations and from demanding higher repayments than other creditors. Diplomats highlight that 90% of debt owed to private creditors by the poorest countries is governed by English law and transacted through the City of London, making UK government action crucial.

Developing countries are spending significantly more of their revenues on debt repayment than a decade ago, often exceeding spending on health and education.

The UK government acknowledges the need for private creditors to participate in restructurings but is not currently pursuing a legislative approach, stating it has seen willingness from private creditors to engage.

Recent restructurings, such as those for Zambia and Chad, have faced significant delays, attributed by some to various factors including the involvement of new types of lenders like Chinese state-owned institutions and African regional banks, as well as complexities despite the inclusion of collective action clauses in most bonds. Some analysts question whether new legislation is the main solution to current restructuring delays.