Draft Outline on a Paper to be Prepared on

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LIMITED

E/ECA/TRADE/48

UNITED NATIONS 26 March 1966

ECONOMIC AND SOCIAL COUNCIL original, English

ECONOMIC COMMISSION FOR AFRICA

Third Meeting of the Intergovernmental

Group of Experts from Ministries of

Finance, Central Banks and Legal Departments on the Escablishment of

an African Monetary Fund

Yaounde, Cameroon, 2-5 April 1986

DRAFT OUTLINE ON A PAPER TO BE PREPARED ON "ISSUES AND PROPOSALS FOR THE INTERNATIONAL CONFERENCE ON

AFRICA'S EXTERNAL INDEBTEDNESS"

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Introductory Note

S, The 21st Ordinary Session of the Assembly of the Heads of State and

Government of the Organization of African Unity resolved that African countries should press for an international conference on Africa's External Indebtedness as a matter of urgency to provide a forum for creditors and African borrowers

to discuss Africa's external debt with a; view: to arriving at appropriate emergency, short-s medium- and long-term measures, to alleviate Africa's debt problems. In this connection, the Secretary General of Organization of African Unity, the Executive Secretary of the Economic Commission for Africa and the President of

the African Development Bank were requested to initiate the necessary preparation in order to ensnare, the success of the conference.

To this end, a meeting of the secretariats of the Organization of African

Unity, Economic Commission for Africa, African Development Bank and the African

Centre for Moentary Studies was convened to initiate preparations in Addis Ababa in December 1985. At that meeting it was decided that a paper outlining the

important debt issues and measures should be prepared. The paper will contain three chapters. The first chapter will deal with the evolution and structure of the debt over the period 1971-1984. In tracing the evolution of the debt problems, it will also highlight structural changes and measures taken by African debtor

countries and creditors to redress the debt servicing difficulties over the period.

The second chapter will deal with the medium and long-term outlook of Africa's external debts by projecting the debt situation as well as debt servicing obligations over the period 1986-2QQ0 under two basic assumptions. Firstly, it will be assumed that existing debt relief measures remain at their present level while under the second assumption debt service obligations will be projected assuming new substantive debt relief measures in the form of lengthened maturity and grace periods,

cancellation and/or conversion of some debts integrants and equity. The third chapter will deal with measures and approaches for solving Africa's external debt problems. It will draw from the scenarios in Chapter two and make proposals on

short-term, medium- and long-term measures that will enable African countries to cope

with debt servicing difficulties. The following outline of the paper gives, in detail,

the various aspects of each chapter for consideration and approval.

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DRAFT OUTLINE

Chapter I: EVOLUTION AND, STRUCTURE OF THE EXTERNAL DEBT SITUATION IN AFRICA

1. Role of External.Finance (Debt) in development and in Africa;in

particular. . . .., . ■ ;: -

2. Evolution in Africa's debt, 1971-1984: ■- ■ :

- Debt outstanding and debt'to'GDP and Exports Ratios - Disbursements ;

- Debt service .

- Net resource transfer •

- Average interest, maturities and grace period

3. Structural changes over the period:

- Non-debt creating and debt creating - Concessional and non-concessional flows

Private - banks and non-bank debt - Private - fixed and variable interest

- Currency composition (share of $» FF and other currencies)

4. Debt owed to Official and Private creditors.

5. Measures taken by African Debtors to redress the crisis;

- Demand for rescheduling Adjustment neasures

r- Export promotion .

- Domestic resource mobilization

■ . - Efficient utilization of resources (External & Domestic) - External Debt and balance-of-payments management

6. Summary of-major issues and conclusions.

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Chapter II; MEDIUM AND LONG-TERM OUTLOOK OF AFRICAN EXTERNAL DEBTS 1986-2000

1. Projections of debt situation assuming existing external relief . measures remain at their present level 1986-2000.

- total debt outstanding including undisbureed (official and private) - total disbursed and outstanding debf(official and private)

- magnitude of the debt servicing burden and its implications on net refsburce transfers t (a) amortization (official and private)

(b) interest payments (official and private)

2. Projections of debt situation assuming new substantive external relief measures 1986-2000.

- total debt servicing burden assuming lengthening of maturity and granting of grace periods and the extent to which such burden would be reduced.

- magnitude of debt assuming cancellation and/or conversion into

grants and equity of part of existing debt stock and their implications on debt servicing burden.

3. Projection on debt servicing burden assuming a package deal (combination of 1 and 2. *.bove) 1986-2000,

lengthening of maturity of debts publicly guaranteed private

, debts for x yearsiie; . . .

x- » 15 years, x? * ^G yearss x~ = 30- years,-,

XA = **® years and x, = 50 years

according to type of debt and category of countries.

- cancellation and/or conversion into grants of 10 to 20 per cent of OBA debt and restructuring the remainder on IDA terms with 5 to 7 years grace periods.

- refinancing on IDA terns for IB3D loans and refinancing of IMF loans

on better terms, use of reflows from the Trust Fund to meet arrears.

- restructuring private debt3 (non-guaranteed) for 10 to 20 years.

4. Conclusions

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■ .j ...

1. Short-term (for emergency) measures

- earmarking reflows from the Trust Fund and/or foreign exchange earnings to clear IMF/World Bank arrears.

- refinancing cf loans owed to suppliers and restoration of import financing facilities.

2. . Medium and Long-term measures ; •

- debt relief measures: lengthening of" maturity and grace . • . ., . . -periods., cancellation and/or conversion of' some ODA loans

into,, grants; and equity, restructuring-of private debt (both publicly guaranteed and non-r*uaranteod),

... ■ - special treatment of external debts of the least developed

countries, : ■

- capitalization of interest

- partial repayment of debt in local currencies - increased flow of ODA resoruces

- increased allocation of SDRs to African countries

- extension of more resources through the External Fund Facility, - increased flow of IDA resources.