Africa’s quarterly economic performance and outlook April – June 2024 : Sovereign debt restructuring: timelines and predictability

Abstract

High levels of debt due to global shocks, capital flight and fiscal challenges, among other things, expose countries to greater risk of debt distress, debt default and sovereign debt restructuring. Seven African countries are currently in debt distress, of which four have applied for debt restructuring under the Common Framework for Debt Treatments beyond the Debt Service Suspension Initiative. These same countries are experiencing significant delays in debt restructuring, which has made it difficult to predict when each step of the restructuring process will be completed. To effectively address the dilemma of unsustainable sovereign debt around the world, it is crucial to improve frameworks for restructuring such debt. This issue will be the main theme of the present report. Recent economic developments and the economic outlook for Africa, with respect to growth, inflation performance, the fiscal situation and exchange rate movements, are the focus of section 2 of the report. Sovereign debt restructuring and past distress initiatives are examined in section 3. The timelines of the restructuring processes are assessed in section 4. Section 5 contains recommendations for policies to advance the global debt restructuring architecture and improve restructuring timelines and predictability.