The Group of 20 main economies and the Paris Club, an informal group of public creditors coordinated by the French Ministry of Finance, agreed last month to freeze debt payments of the 77 poorest countries this year in order to free them money to fight the coronavirus pandemic.
However, some debtor countries have been reluctant to register, fearing that it will hurt their credit rating after the credit rating agencies declared a default by private creditors who agreed to suspend debt payments in parallel with the Club could be considered a default.
Kenya’s finance minister told Reuters last week that was one of the reasons why Nairobi would not apply.
So far, the Paris Club has only signed deals with the Caribbean islands of Dominica and Grenada, Mali and Nepal, the French source said.
But the Club has now made it clear that candidate countries can specify that they only want to alleviate their debts to state creditors.
“We have about 20 more in the process of finalizing the documents to sign the agreements and we expect another dozen to request them in the coming days,” the source said.
The countries likely to sign soon are Cameroon, the Democratic Republic of Congo, the Republic of Congo, Ethiopia, Pakistan and Mauritania, said another source familiar with the matter.
The Paris Club generally requests borrowing governments to seek the same conditions for debt repayment from private sector creditors.
With this exception to this rule, rating agencies now understand that the debt relief program is not negative for ratings, the same source said.
Countries eligible for the program have a combined total of $ 36 billion maturing this year, consisting of $ 13 billion owed to other governments, $ 9 billion to private creditors and the rest to multilateral development lenders . (Report by Leigh Thomas; Edited by Kevin Liffey)