African Union Development Agency Says African Multilaterals Preferred Creditor Status ‘Very Important’ for Attracting Development Capital; Agency to Commission Study Of Economic Benefits

The African Union Development Agency, or AUDA-NEPAD, will soon commission a study to quantify the economic benefits of granting preferred creditor status to African multilateral financial institutions, or AMFIs, agency CEO Nardos Bekele-Thomas told Octus, formerly Reorg, on the sidelines of the African Export-Import Bank’s annual meeting in Abuja, Nigeria.

“Preferred creditor status is very important for attracting private capital to support the sustainable development of Africa,” Bekele-Thomas said. “This data-driven analysis will provide policy makers with the evidence they need to make informed decisions.”

The study will be commissioned in collaboration with the Alliance of African Multilateral Financial Institutions, or AAMFI.

An AUDA-NEPAD statement, shared with Octus, about the upcoming study reads: “The debate around PCS [preferred creditor status] for AMFIs is often framed as a question of deservingness. However, the real question is: Can Africa afford not to grant PCS to its own development finance institutions? AMFIs are uniquely positioned to understand Africa’s development needs and priorities. Denying them PCS undermines their ability to attract capital and effectively support sustainable development.”

In response to a question about in which forums African finance institutions like Afreximbank could seek to defend their creditor status, Bekele-Thomas said the approach should be multilateral. “We really believe in the power of multilateralism,” she pointed out.

Afreximbank, African Trade & Investment Development Insurance, or Atidi, and Trade and Development Bank, or TDB are challenging their designation as commercial creditor in Ghana’s restructuring, which is taking place under the G20 Common Framework, as reported. Afreximbank and TDB are also reportedly seeking preferred creditor status in Zambia’s restructuring.

Fitch Ratings recently downgraded Afreximbank’s credit rating with a Negative outlook, partly due to the bank’s potential exposure to Ghanaian and Zambian debt.

“The current system of credit rating is, at times, not a true reflection of the value and assets which Africa possesses,” Bekele-Thomas told Octus.

“We need to have a real deep dive into how credit ratings agencies assess African multilaterals. That’s why Africa wants to have its own credit rating agency.”