According to the data presented during the closing session of the 53rd Session of UNECA, with the title 'Sustainable Industrialization and Diversification in the Digital Era in the Context of Covid-19', the creation of this Liquidity and Sustainability Instrument can save 11 billion dollars in interest charged on debt issues in African countries.
"The fund allows sovereign debt holders to use this instrument as collateral for low interest loans financed in part by the new issue of Special Drawing Rights; the funds mobilized through these repurchase agreements will then be used to finance investments in countries emerging markets ", explained the director of fund manager Eighteen East Capital, Thomas Venon.
"Developed countries have had these 'repo' markets for their government bonds for a long time, facilitating the creation of stable and additional sources of finance," recalled Venon, explaining that "the Liquidity Instrument and Sustainability will replicate this dynamic for emerging market debt securities, giving investors competitive financing through repurchase agreements ".
The debt of African countries, totaling US $ 544 billion, is the largest in any developing region, due to GDP, and the high levels of debt make investments in infrastructure and human capital development impossible, which, in turn, it holds private investment, say UNECA officials.
"The continent faces four combined challenges: high levels of debt, currently around 70 per cent of GDP, high budget deficits of 8.7 per cent of GDP, on average, the high cost of financing and currency depreciations", read in the communiqué distributed from Addis Ababa.
This is coupled with the "pressure that African governments face to continue servicing debt and avoid the stigmatization in the financial markets associated with debt relief".
"Liquidity is very important at a time when we lack budgetary room for maneuver; debt service is so large, and absorbs most of our budgets, so we need room to maneuver to help our population and keep us to grow and be able to repay these debts ", commented the Secretary of State for Budget and Public Investments of Angola, Aia-Eza da Silva, mentioned in the statement.
"We need more space to breathe, and this Instrument can give us that", concluded the minister.
