Shifting Sands in Multilateral Finance
The delicate architecture of African development finance has rarely been under such acute scrutiny. In recent months, creditor committees dominated by members of the Paris Club and large bilateral lenders have encouraged Ghana and Zambia to suspend payments to two hybrid multilateral institutions, the African Export-Import Bank and the Trade and Development Bank. In doing so, they are asking the two sovereigns to rank these banks alongside hedge funds and bondholders rather than together with the World Bank or the African Development Bank. The signal is stark: the convention of preferred creditor status, long considered sacrosanct in development circles, is suddenly open to reinterpretation.
A Contested Hierarchy of Claims
Preferred creditor status is neither codified in treaty law nor enforced by a supranational court; it exists because markets, rating agencies and sovereign borrowers tacitly agree that multilateral lenders sit first in the queue. That consensus allowed Afreximbank and TDB to raise medium-term funds at spreads far below the corporate curve and to on-lend to strategic projects from Port-Gentil in Gabon to Pointe-Noire in Congo-Brazzaville. Should that hierarchy collapse, borrowing costs would inevitably climb. Fitch Ratings has already warned that reclassifying the banks as commercial creditors would prompt ‘downward pressure’ on their ratings (Fitch 2024).
Hybrid Multilateralism under Scrutiny
Critics argue that the presence of private shareholders inside Afreximbank and TDB blurs the lines between public development mandate and profit motive. Yet hybrid capital structures were authorised by African Union member states precisely to circumvent chronic under-capitalisation. Comparable models operate in Latin America’s CAF and in the European Bank for Reconstruction and Development, both of which enjoy the market’s presumption of seniority. As Professor Aloysius Uche Ordu of the Brookings Institution observes, ‘equating hybrid multilateral banks with purely commercial lenders ignores the public-good rationale behind their creation’ (Ordu 2023).
Macroeconomic Reverberations for the Continent
The immediate risk is a spike in funding costs for the two banks, whose combined balance sheet of roughly 40 billion dollars is levered to syndications on global capital markets. A one-percentage-point increase in their average cost of funds could translate, by Afreximbank’s own calculations, into a reduction of almost 500 million dollars in annual lending capacity. That contraction would be felt most keenly by mid-income African economies that straddle commodity and service sectors yet lack deep local capital markets. The International Monetary Fund estimates that Africa’s infrastructure gap still exceeds 100 billion dollars per annum (IMF 2023); any curtailment of regional lenders’ firepower therefore widens the chasm.
The Congo-Brazzaville Perspective
Congo-Brazzaville offers a pertinent illustration of what is at stake. Over the past decade the government of President Denis Sassou Nguesso has diversified external partnerships while maintaining prudent debt-service discipline. Afreximbank’s credit lines have underwritten upgrades at the Port Autonome de Pointe-Noire and financed a cross-border fibre-optic corridor that feeds the sub-regional data market. Treating Afreximbank as an ordinary commercial creditor would raise the sovereign’s own refinancing costs, precisely when the administration has embarked on a calibrated fiscal consolidation endorsed by the IMF under the 2022 Extended Credit Facility arrangement. Officials in Brazzaville privately note that a negative shock to the bank’s rating could force the treasury to re-sequence its medium-term expenditure envelope, delaying planned investments in agri-processing and renewable energy.
Legal and Political Fault-Lines
Beyond economics, the controversy exposes a jurisprudential grey zone. Afreximbank’s charter, signed by 52 African states, stipulates that obligations owed to the institution ‘shall rank at least pari passu with all other external public debts’. Ghana’s decision to suspend payments therefore creates a potential breach of contract and raises the spectre of litigation at the Commercial Court in London. Diplomats in Addis Ababa, where the African Union maintains a task force on debt sustainability, warn that a wave of lawsuits could splinter the Common Framework for Debt Treatments, the G20-sponsored mechanism designed to streamline restructurings (African Union Briefing 2024).
Global Governance and Realpolitik
The debate unfolds at a moment when the international community is searching for incremental capital to finance climate adaptation and the Sustainable Development Goals. At the Paris Summit for a New Global Financing Pact, leaders endorsed the principle of empowering regional development banks as ‘force multipliers’ of concessional finance. Relegating Afreximbank and TDB would run counter to that pledge. Chinese lenders, despite being major creditors to both Ghana and Zambia, have refrained from challenging the two banks’ seniority, a stance interpreted in Beijing as affirmation of South-South financial solidarity. Western creditors risk isolating themselves from that emerging consensus.
Charting a Pragmatic Path Forward
There is still room for compromise. Precedent exists in the 2020 Argentine restructuring, where the Inter-American Development Bank preserved its privileged status despite holding hybrid capital. A similar accommodation for Afreximbank and TDB would reassure capital markets, protect countries such as Congo-Brazzaville that rely on their counter-cyclical lending, and uphold the principle that development finance serves purposes distinct from commercial banking. Ultimately, a stable hierarchy of claims is as valuable to creditors as to borrowers: it anchors repayment expectations and reduces litigation risk. Preserving that equilibrium, rather than renegotiating it piecemeal in the heat of each crisis, would be a modest but meaningful contribution to Africa’s quest for sustainable prosperity.
