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Banks Warn Debt “Forgiveness” could Hurt African Nations

Scrapping the debt of heavily indebted African nations will only come back to haunt them, according to two of the continent’s largest banks.

“Forgiveness is not helpful because your debt is somebody’s else’s savings,” Ade Ayeyemi, chief executive officer of Lome, Togo-based Ecobank Transnational Inc., said in an interview at the Bloomberg Invest Global virtual conference on Monday. “When you go to the market to borrow money, the market is looking at your current and past behavior.”

China last week pledged to cancel some interest-free government loans for African nations and offered to rework commercial obligations as the world’s poorest continent grapples with how to handle the coronavirus pandemic.

The vow means debt suspension by the Group of 20 leading economies is gaining traction for all types of official funding, after an initial focus on Paris Club agreements.