COVID‐19 and Debt Restructuring

Orrick’s Thomas Laryea, Lorraine McGowen and Nell Scott led a webinar on the impact of COVID-19 and sovereign debt restructuring, hosted by the Macroeconomic and Financial Management Institute of Eastern and Southern Africa (MEFMI). The webinar was designed to raise awareness among government debt managers of the debt relief options available to countries in response to the COVID-19 pandemic. Other speakers included Toyin Ojo, who presented on the African Legal Support Facility’s legal and technical assistance to African countries on sovereign debt restructuring, and Andrew Bvumbe from the Ministry of Finance and Economic Development of Zimbabwe, who spoke about Zimbabwe’s distinctive experience.

While many countries in Africa have relatively contained the health consequences of COVID-19, the economic costs continue to rise. The international community has recognized that countries should not be placed in the untenable choice between maintaining social and health spending to combat COVID-19 or staying current on debt payments.

One option available is the G-20 Debt Service Suspension Initiative (DSSI), which provides time-bound relief to low income countries on certain debt service, upon request by an eligible country. The DSSI is directed to short term liquidity alleviation and does not address underlying debt sustainability challenges. Rather, it provides breathing space, during which additional tools for debt restructuring can be harnessed.

Orrick’s presenters also addressed the legal and financial considerations of other tools for sovereign debt restructuring and proposals for further legal innovation. An overarching emphasis of the presentation was the importance for low income countries to preserve, where feasible, their hard-earned access to international capital markets, which is needed in order to achieve their longer term development finance objectives.

The webinar was well attended by government representatives across Eastern and Southern Africa.