Sovereign Guarantees retard Africa’s development
Hon. Seth E. Terkper
22nd October, 2018
In late-September 2018, I appealed to Sub-Saharan African (SSA) states to find credible and sustainable alternatives to Sovereign Guarantees, which are used to indiscriminately support almost all public sector and quasi-fiscal loans, for both commercial and non-commercial projects. Consequently, they are deemed to crystalize immediately as public debt. It was at a roundtable event in Abidjan (Cote d’Ivoire) on project financing, organized by TXF (Trade Finance) Network and co-sponsored by the African Development Bank (AfDB) and others.
The conditions for these guaranteed loans, notably their inclusion on gross basis as “pure” public debt in SSA’s debt sustainability analysis (DSA) retards Africa’s development and progress. The development of convincing and credible alternatives may take time but SSA states can start with commercially-viable projects that can generate revenues to pay for their underlying loans. SSA Finance Ministers, especially those that have attained “middle income country” (MIC) status, and are losing access to concessional loans and grants, must work harder on alternative financial and fiscal regimes to replace sovereign guarantees.