BAKU, Azerbaijan, February 13. A decline in official development assistance (ODA) and increasingly complex debt restructuring mechanisms are compounding the challenges facing developing countries, President of the European Bank for Reconstruction and Development (EBRD) Odile Renaud-Basso said at the Munich Security Conference, Trend reports.
“In terms of the challenges, two additional elements should be highlighted. The first one is a drop of ODA. You have the debt crisis combining with a very significant drop of ODA, and this will have an impact,” she said, noting that the allocation of limited resources is becoming increasingly difficult.
According to her, the second major issue concerns the growing complexity of debt restructuring mechanisms.
“I used to chair the Paris Club a long time ago, and at that time Paris Club creditors had the bulk of the debt. Although negotiations in the 1990s with highly indebted countries sometimes took time, there was a structured framework that allowed creditors to come together and agree on treatment, including debt cancellation,” she recalled.
She added that today, however, the creditor landscape is far more fragmented.
“You have Paris Club creditors, but they are smaller; there are more bondholders, more private debt, bilateral private debt without bondholders, and large bilateral creditors that do not belong to the Paris Club. The mechanisms for cooperation are much more challenging,” Renaud-Basso explained.
She described the G20 Common Framework as “the right approach to bring everybody on board,” but acknowledged that the process remains slow. “Some progress has been made, but acceleration, better cooperation and more involvement of all sorts of creditors is needed,” she said.
She also pointed to work carried out under the G20 capital adequacy framework, which has helped unlock additional lending capacity among MDBs.
Finally, Renaud-Basso emphasized the importance of facilitating private investment that does not increase sovereign debt burdens.
“We need to facilitate investment that is not necessarily government debt borrowing, but investment with private investors that can contribute to developing services, addressing needs, creating jobs and contributing to positive growth, helping countries get out of this debt crisis,” she said.