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A Proposal for a New Approach to African Debt

The paper proposes a new approach to managing distressed African sovereign bonds denominated in foreign currency and governed by foreign law. It argues that the stakeholders in such debt should seek to disrupt inter-creditor dynamics and create incentives for bondholders to be more open to innovative ways of delivering debt relief. One way to change these inter-creditor dynamics is a DOVE (Debts of Vulnerable Economies) Fund. This fund would be established by public, private, and civil society stakeholders to invest in marketable foreign currency debt issued by African countries. By its mandate, the Fund would commit to participate in debt restructuring negotiations based on a set of guiding principles clearly articulated ex ante and grounded in applicable international standards. The guiding principles would be designed to ensure that the debt restructuring process is transparent and fair to all stakeholders, and that its outcomes promote socially and environmentally inclusive development in the debtor country.