World Bank’s Malpass criticizes Chad creditors’ plan for failing to reduce debt

WASHINGTON (Reuters) – World Bank President David Malpass on Friday said he was deeply concerned about Chad’s longer-term ability to pay its $3 billion in external debts since an agreement reached by the African country’s creditors does not call for any actual debt reduction.

Chad on Friday confirmed a Reuters report that it had reached a debt agreement with Swiss commodities trader Glencore (OTC:) and other creditors, but sources said the deal will not reduce the overall debt level.

“This is a long-term problem that they’re facing,” Malpass said. “The challenge is that the agreement that they reached with the creditors doesn’t reduce the debt … There’s not a reduction in net present value.”

Malpass said he had advocated that debt treatments reached under the Common Framework – a mechanism created by the Group of 20 major economies to help poor countries weather the fallout from the COVID-19 pandemic – include actual debt reductions.

Chad was the first country to request debt treatment under the framework, and the first to reach a deal with creditors.

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

“For longer-term sustainability beyond the window of this agreement, there needs to be a mechanism to reduce the debt,” Malpass said, citing ongoing shocks facing oil producer Chad, including the volatility of oil prices.

Glencore and creditors had argued that Chad did not need debt relief at the moment since higher oil prices had lifted its revenues, but Malpass said changes in the oil price could leave Chad vulnerable in the future.

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