Ade Adeyemi, the Chief Executive Officer of Ecobank Transnational Incorporated, has advised African countries seeking debt relief from advanced creditor nations to have a rethink.
Speaking during an interview at the Bloomberg Invest Global virtual conference, which commenced yesterday, the bank chief said debt forgiveness would come back to hunt the beneficiary nations.
He said: “Forgiveness is not helpful because your debt is somebody’s else’s savings. When you go to the market to borrow money, the market is looking at your current and past behaviour.”
“To a great extent, forgiveness is a form of default, and, essentially then, what it does is that it distorts markets, so it is one area that we should all be conscious of the unintended consequences,” James Mwangi, CEO Nairobi-based Equity Group Holdings, Kenya’s largest bank by market value, said in the same interview.
“Essentially, it talks about the creditworthiness of a country.”
The G-20 in April agreed to provide the relief to help free up funds for more than 70 poor nations to deal with the pandemic, but the process has been slow, with many private creditors on the sidelines.
While a lockdown to contain the pandemic has impeded output and sales of most companies in the continent, it is boosting digital payments and helping governments achieve their goals of financial inclusion, said Ayeyemi, whose lender has operations in 33 countries across the continent.
Ecobank is seeing 95 per cent of transactions done on digital platforms since the pandemic started, compared with 90 per cent previously.