The governments of Ghana and Zambia recently took a decision that could have serious consequences for other African countries. The decision relates to arrangements on how the two countries will repay the debt they owe to Africa Export-Import Bank (Afreximbank).
They have both taken decisions to relegate Afreximbank to a commercial lender from a preferred creditor. This means that the terms on which Afreximbank has lent money to these two countries will change. And it will lose certain protections. For example preferred creditors are repaid first, before any other lenders.
This protects preferred creditors’ balance sheets and enables them to continue lending during crisis periods when others cannot. In contrast, commercial banks get paid later or might not get paid at all. This higher risk factor means that they charge higher rates.
