ECA launches LSF, a vehicle for debt management and fiscal sustainability
In a bid to assist member States have access to a facility that will strengthen their liquidity in the short term and restart growth in the longer term, the Economic Commission for Africa (ECA) has partnered with PIMCO, an asset management corporation, to set up a Liquidity and Sustainability Facility (LSF) that would lower governments’ borrowing costs by increasing the demand for their sovereign bonds. This will be achieved by making it possible for existing sovereign bondholders to post such instruments as collateral for low-interest loans financed in part by a new issuance of Special Drawing Rights (SDRs). The resources mobilized through such repurchase agreements will then be used to finance investments in emerging market sovereigns. In a bid to meet their growing development financing needs African countries have borrowed from private creditors. As a result, their debt landscape has changed in the last decade, with private debt assuming a little over 40 percent of its total debt stock. The continent faces four combined challenges: of heightened debt levels, currently estimated to be about 69% of GDP; high fiscal deficit of an average of 8.7% of GDP; the high cost of borrowing; and currency depreciations against major currencies. According to the ECA, African governments are also under pressure to keep up payments on debt service and avoid stigmatization in financial markets associated with debt relief. The 53rd session of the ECA’s Conference of African Ministers of Finance, Planning and Economic Development is being held under the theme; Africa’s sustainable industrialization and diversification in the digital era in the context of COVID-19.
| Format: | Press release biblioteca |
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| Language: | eng |
| Published: |
2021-03
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| Online Access: | https://hdl.handle.net/10855/45906 |
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