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OpenMthuli Ncube Urges African Nations To Prioritise Debt Restructuring
The Minister of Finance, Economic Development, and Investment Promotion, Mthuli Ncube, has called on African nations to prioritise debt restructuring with international creditors.
Ncube warned that rising debt levels and the increasing cost of capital present a significant threat to economic stability across the continent.
He said the growing burden of unsustainable debt is being further compounded by external shocks, including climate change, inflationary pressures, and tightening global financial conditions. Said Ncube:
We need to understand the changing global landscape, where debt levels are rising, the cost of capital globally is also increasing, and climate shocks continue to impact countries, costing between 2% and 5% of GDP.
Several African countries, including Zimbabwe, Ghana, Zambia, Egypt, Nigeria, Kenya, Ethiopia, and Angola, are grappling with severe debt distress.
There are growing concerns that, without decisive action, the situation could escalate into a full-blown economic crisis, potentially leading to social and political instability.
Debt restructuring is a process in which a government renegotiates the terms of its sovereign debt to ease financial distress and make the debt more sustainable. This typically occurs when a country struggles to meet its debt obligations due to economic challenges such as a recession, low revenues, or excessive borrowing.
During sovereign debt restructuring, the government works with international creditors—including foreign governments, international financial institutions, and private bondholders—to modify repayment terms.
Possible restructuring measures include extending the repayment period, reducing the principal amount, lowering interest rates, converting debt into equity, or deferring payments for a specified period.
The objective of sovereign debt restructuring is to alleviate the debt burden, restore economic stability, and ensure that creditors recover a portion of what is owed.
Ncube also emphasized the need to reform the G20 Common Framework, a global initiative aimed at helping developing countries restructure their debt. He said:
We need to reform the framework so that countries can receive the necessary support in restructuring their debt.
Additionally, African nations must support each other in these efforts to ensure long-term financial sustainability.
Zimbabwe’s total public debt is approximately US$21 billion, which includes both domestic and external debt. The external debt alone is estimated at US$13 billion, owed to various international creditors.
More: Business Times
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