Finance firms may earn $3 billion by delaying debt relief for Ghana and four other nations.

The following report from the British news outlet The Guardian suggests that certain financial institutions stand to benefit substantially from the apparent delay in providing desperately needed financial support to five countries, including Ghana, which has requested $3 billion from the IMF to stabilize its economy.

Tuesday, April 25 saw the release of the report, which is reproduced below.

Some of the world's largest financial institutions stand to gain as much as $30 billion by resisting escalating pressure to provide debt relief for five highly indebted nations, according to a campaign group.

Debt Justice stated that the obstinate posture of private-sector creditors was impeding efforts to alleviate the financial burdens of Ethiopia, Ghana, Sri Lanka, Suriname, and Zambia, which could aid in reducing poverty.

Both the International Monetary Fund and the World Bank have urged private creditors, the largest of which is the US asset management firm BlackRock, to assist in accelerating debt relief under the common framework established by the G20 group of developed and developing nations in 2020.

To date, only one country, Chad, has received debt relief through the common framework, which brings together multilateral creditors like the World Bank, sovereign creditors like China, and private investors.

Ethiopia, Zambia, and Ghana have submitted debt relief applications under the initiative.

Debt Justice asserted that private creditors were stalling to maximize profits on their bond holdings and urged the government to enact legislation to guarantee private creditor participation in debt relief.

Just over fifty percent of bonds held privately are governed by English law.

BlackRock stated that it had a strong track record as a "responsible and constructive" participant in debt restructuring and had a common desire to reach an agreement.

"BlackRock is a long-term investor in emerging market sovereigns on behalf of our clients," said a representative.

We cannot, therefore, unilaterally absolve sovereign debt."

According to a report by Debt Justice, private investors who purchased the bonds of Ethiopia, Ghana, Sri Lanka, Suriname, and Zambia when they were initially issued stand to gain $20 billion if they are repaid in full.

If the bonds were purchased at current depressed prices and paid in full, private creditors would earn $30 billion in profit.

Debt Justice's executive director, Heidi Chow, stated, "Private lenders are having their cake and eating it, too."

They have already profited from charging premium interest rates to cover their risk, and now that countries are unable to pay, they wish to profit from full payment as well.

"Because vital public services, such as healthcare, education, and climate change mitigation, are at stake, lenders must be compelled to negotiate debt cancellation, and new legislation can do just that."

The advocacy group suggested that the government update the 2010 legislation that prevented creditors from requesting more than they would have received in an earlier round of debt relief, namely the Heavily Indebted Poor Countries (HIPC) initiative.

A government spokesperson stated, "The United Kingdom has consistently emphasized the importance of private creditor participation in debt restructurings at the international level, and we are collaborating closely with industry partners to bolster this approach."

"We remain committed to raising awareness of reforms led by the United Kingdom to bolster private debt restructurings and encouraging financial institutions to adopt these provisions."

courtesy of The Guardian

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