Treaty Commitments

When a country can no longer pay all its debts, the order in which creditors are paid, and who is asked to take losses, becomes the central question. Multilateral lenders such as the IMF and the World Bank have long been treated as “preferred creditors”: they continue to be paid and are left out of restructurings, so that they can keep lending when countries most need them. African multilateral financial institutions (AMFIs), such as the African Export-Import Bank (Afreximbank) and the Eastern and Southern African Trade and Development Bank (TDB), claim the same protection. In recent restructurings that claim has been openly contested. This essay argues that the debate starts in the wrong place. The first question is not whether other creditors are willing to recognise AMFIs as preferred, but what the borrowing states themselves have committed to under the treaties establishing these institutions. On that view, AMFI loans to their member states should continue to be serviced and should be excluded from restructuring, and AMFIs should resist a lesser form of protection that accepts compulsory payment deferrals or losses. Market recognition matters, but it should follow from binding commitments honoured in practice; it does not decide whether those commitments exist.