A debt standstill looks unworkable in the U.S., but it might yet be possible in Africa.
Driving the news: The biggest names in African finance are urging the International Monetary Fund and the World Bank to announce a "standstill" on the continent's external debt obligations.
- If all African countries stopped making principal and interest payments on their bonds for the rest of this year, that would save the continent some $44 billion, Brookings senior fellow Brahima Coulibaly tells Axios. That money could then be used to directly address the costs associated with the health crisis.
How it works: By encouraging all African countries to default on their bonds (as well as on bilateral debt), the IMF would minimize the cost of default for any individual nation. Meanwhile, rich-country governments could try to pressure bondholders to avoid a rush to New York and London courts in the midst of a global pandemic.
Between the lines: Such a standstill only works for sovereign debt, says Coulibaly. African corporations also need debt-service relief — the liquidity required to pay the principal and interest on their bonds — but Coulibaly says they should turn first to their governments, rather than their faceless capital-markets creditors.