Côte d’Ivoire (Ivory Coast) has requested to join an initiative called Debt Service Suspension Initiative(DSSI) which would allow the country to benefit from a debt relief until the end of the year.
The leading cocoa-producing country believes that the debt holiday will enable the government to focus more on health services and tackle the downing effects from coronavirus pandemic.
The total amount of debt service that is eligible for suspension is 119 billion CFA ($205.45 million), as read by a letter dated June 15th, 2020, which was sent by the government to its main creditors.
“Ivory Coast has decided to request participation in the DSSI initiative and, as such, has sent official requests to its main creditors in the official bilateral sector, as well as to the Paris Club,” the government said.
The demand is under the Group of 20 major economies – G20 Debt Service Suspension Initiative (DSSI) to assist 77 low-income countries, backed by the Paris Club.
Furthermore, the francophone country didn’t demand any debt relief on loans incurred from private lenders, which the Paris Club had previously urged for voluntary participation of the private sector in the DSSI.
Member countries of the Paris Club have raised concerns that their credit rating and worthiness might be negatively affected after benefiting from the DSSI. Meanwhile, some credit-rating institutions assert that stalling debt service owed to official bilateral creditors would, by itself, be unlikely to have rating implications.
Basically, the Paris Club is a group established in 1956, to negotiate, coordinate, and develop sustainable solutions to debt difficulties encountered by debtor countries. Since the outbreak of COVID-19, the institution has been very pivotal in helping vulnerable countries renegotiate their foreign debts.
Over the past few months, Abidjan has been hit by turbulence from COVID-19, which has forced the government to adopt various economic measures to cushion the macro-economy.
In April 2020, the government issued a private sector support fund of XOF 250 billion, in order to embrace the SMEs with at least XOF 100 billion and also setting up of guarantee funds, with an aim of facilitating the access to bank credits.
In addition, a program for the leading sectors of the national economy, particularly cashew nuts, cotton, rubber, oil palm, cocoa, and coffee with XOF 250 billion.
With the backing of the Paris Club, the government can put its financial focus solely on pressing priorities of COVID-19 amongst other demands from the macro-economy.
In 2018, Ivory Coast recorded a public debt of $22,896 million, which increased by $3,883 compared to 2017. External debt is still on the rise due to budget funding and concession projects in the country. With the outcome of coronavirus, probably Africa states will be more conscious about loan acquisition and the burden of servicing them.