A quiet but consequential contest is playing out in the global financial architecture. One that could determine Africa’s ability to finance its own development.
In recent months, powerful voices from the International Monetary Fund (IMF), the Paris Club and US investment bank JP Morgan have questioned the preferred creditor status of African multilateral development finance institutions. These institutions include the Africa Export-Import Bank (Afreximbank) and the Trade and Development Bank (TDB).
Preferred creditor status is a long-standing practice in global finance. It gives multilateral development finance institutions priority in being repaid when a country faces financial distress. The idea is simple. These institutions lend to promote development. During crises, they step in with counter cyclical lending – increasing support when commercial creditors pull out.
