Chad agrees to a debt plan with its creditors, including Glencore

  • Chad becomes the first country to conclude an agreement under the common framework
  • Deal expected to pave way for more IMF financing
  • Details of the debt treatment have not been released

N’DJAMENA, November 11 (Reuters) – Chad has reached an agreement with its creditors, including Swiss commodities trader Glencore (GLEN.L), paving the way for more financing from the International Monetary Fund, but stopping before reducing the Central African debt 3 billion dollars of external debt of the country.

The agreement, presented by Chadian Finance Minister Tahir Hamid Nguilin on Friday, is the first to be concluded under the Common Framework – a mechanism created by the Group of 20 major economies at the end of 2020 to help poor countries cope fallout from the COVID-19 pandemic. However, the framework has been widely criticized for delays in delivering debt relief.

The minister’s statement confirms a Reuters report that creditors had reached an agreement in principle. It also marks China’s first participation in a joint debt settlement agreement with other creditors, a source familiar with the process said.

“Chad is the first country to reach an agreement with its public and private creditors within the common framework of the G20,” Eric Lalo, head of sovereign advice at Rothschild & Co and adviser to the Chadian government, told Reuters.

The “favorable outcome for Chad” of these negotiations will help the country access much-needed financing from international financial institutions and address potential debt sustainability issues in advance, Lalo added.

Nguilin said the parameters of the debt treatment were in line with Chad’s commitments under its Extended Credit Facility (ECF) program with the IMF as well as the principles of the Common Framework, making “possible the restoration sustainability of public debt”.

He did not specify the terms of the agreement in his statement.

World Bank President David Malpass told Reuters on Friday he was “deeply concerned” about Chad’s long-term ability to repay its debts given the continued volatility in oil prices and the inability of creditors to pay. agree to real debt reductions.

“It’s a long-term issue that they’re dealing with,” Malpass said. “The challenge is that the deal they’ve made with the creditors doesn’t reduce the debt… There’s no reduction in net present value.”

A source familiar with the negotiations told Reuters on Thursday that this would include a reprofiling to lengthen Chad’s debt payments in 2024, but no debt “haircut”.

A third of Chad’s external debt, which stood at nearly $3 billion at the end of 2020, according to IMF data, is commercial and concentrated in an oil-backed loan from Glencore.

“We are pleased that all stakeholders have agreed on how Chad’s external debt should be treated,” a Glencore spokesperson said in an emailed statement.

Chad said the agreement with bilateral and commercial creditors will allow another disbursement of its $572 million four-year ECF program by the end of 2022, pending IMF approval.

FIRST JOINT FRAMEWORK AGREEMENT

In addition to Chad, Ethiopia and Zambia have also requested debt restructuring under the common G20 framework.

World Bank and IMF officials, as well as Western finance officials, are increasingly frustrated by what they see as China’s delay in resolving debt problems, despite its role as largest bilateral creditor in the world.

China, which holds about $291 million of Chad’s external debt, has tended to offer debt relief by extending maturities rather than accepting write-downs on loans. Beijing rejects claims that it delayed work on cases such as Zambia.

It was widely expected that Chad would be the first to conclude a framework agreement given the composition of its external creditors. It reached an agreement in principle with official creditors last year, but Glencore and other private creditors have been reluctant to join so far.

In October, the country’s bilateral creditors – China, France, India and Saudi Arabia – said in October that the country does not currently need debt relief given rising prices. oil, but pledged to meet again and offer help to Chad if needed.

The IMF said earlier this month that it could not make more disbursements to Chad under the ECF program which started in 2021 until a “contingent” debt relief agreement be agreed to by the creditors.

Neither the IMF nor the Paris Club were immediately available for comment on Friday.

Reporting by Mahamat Ramadane in N’Djamena, Karin Strohecker in London and Andrea Shalal in Washington; Written by Nellie Peyton and Rachel Savage, editing by David Goodman, Jane Merriman and Toby Chopra

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