The Refinancing Hand

The problem

The largest drain on Africa's public finances is not corruption, or war, or the price of oil. It is interest. Governments on the continent spent an estimated $163 billion servicing external and domestic debt in 2024, nearly three times the figure in 2010, and in many countries debt service now consumes more than the budget for health or education. The debt is not, for most of them, unusually large as a share of the economy; it is unusually expensive. African sovereign bonds yielded an average of 9.8 percent in 2023, and the successful issues of 2024, by Côte d'Ivoire, Benin and Kenya, were priced at more than 8 percent. The United States borrows at about 4. A country paying 9 percent on $10 billion pays $500 million a year more than the same country would at 4, and that $500 million is a hospital a year, forever.

When the debt does go wrong, the machinery for fixing it does not work. The G20's Common Framework, created in 2020 to coordinate restructurings across Western, Chinese and private creditors, took 38 months to produce an agreement for Zambia. Ghana's 2024 deal required its bondholders to accept a 37 percent haircut, after two years in which the country could borrow from no one. About 43 percent of Africa's external public debt is now owed to private creditors, mostly bondholders, who move faster than governments and charge for the privilege.

The rate is the lever. A large share of the premium African governments pay reflects a risk that their partners could remove: the risk that a government in a currency crisis defaults on a bond it could have serviced in a better year. A guarantee from a creditworthy partner, attached to conditions that keep the borrower's finances honest, removes that risk and the premium with it. The United States has done this before, for Israel in the 1990s and for several countries after the 2008 crisis, through loan guarantees that cost the Treasury nearly nothing and saved the borrowers billions. № 006 proposed that America underwrite Africa's buildout. The most valuable thing it can underwrite is the interest bill.

The proposal

The Refinancing Hand: an American sovereign guarantee facility of up to $100 billion, through which partner governments in the Marshall Compact may refinance existing external debt at a rate near the United States' own, on conditions: a published fiscal framework, an independent audit of the debt, transparency of every loan including those from China, and a commitment of the interest saved to the projects of № 111 and its successors. The guarantee is called only on default, and the discipline is the price of the rate.

How it would work

1. The facility. The Treasury guarantees new bonds issued by qualifying partner governments to retire existing external debt, up to $100 billion in total across the Compact's members, phased over a decade. A guaranteed bond trades near the American rate; the difference between that and the retired debt's coupon is the saving.

1. The conditions. A government joining the facility publishes a medium-term fiscal framework, submits its entire debt stock, including every loan from every creditor, to an independent audit that is published, and commits by law that the interest saved, calculated and published annually, is spent on the electrification, water and transport projects of the Compact. The facility does not dictate the budget; it requires that the budget be visible and the saving be built.

1. China at the table. A country cannot refinance what it cannot see. The audit in item 2 discloses the terms of loans from Chinese state lenders, which have often been secret, and the facility refinances them on the same terms as any other creditor's, which means Chinese lenders are repaid at par and lose the leverage of a loan whose terms nobody else knows. That is the design.

1. The private creditors. Bondholders are refinanced at market, which is to say they are paid what their bonds are worth, and they lose the 9 percent coupon on debt that is now guaranteed by the United States. Some will object; most will sell.

1. Called only on default. The guarantee costs nothing unless a government defaults on a guaranteed bond, at which point the Treasury pays and the government owes the Treasury under the conditions of item 2, with the Compact's other benefits suspended. The expected loss on sovereign guarantees to countries meeting the conditions is low, and the facility's budget cost is scored on that basis.

1. The Fund's part. The Fund of № 001 may hold the guaranteed bonds at market weight under the Index Rule, as it holds any sovereign bond; they are, once guaranteed, among the safest assets it owns, and the yield is the borrower's saving shared.

1. Published. Every guarantee, its rate, the debt it retired and its rate, the saving, and where the saving went, on one page, annually.

The numbers

The saving. Refinancing $100 billion of debt from an average of 8.5 percent to about 4.5 saves about $4 billion a year in interest, for as long as the bonds run, committed to projects: twenty years of a Power Africa at its peak, every year, from money the borrowers were already paying.

The cost. The expected loss on $100 billion of guarantees to governments meeting the conditions, at a default rate of a few percent over a decade, is on the order of $2 to $4 billion, scored up front. The 1990s guarantees to Israel and the 2010s guarantees to Jordan, Tunisia and Ukraine were called in none of the cases.

The comparison. The United States has provided about $60 billion in sovereign loan guarantees since 1990, at a budget cost that rounds to a small fraction of the face value. The facility is that instrument at the scale of a continent.

The alternative. $163 billion a year in debt service, rising, with restructurings that take three years and cost the bondholders a third and the country its access to credit. The facility ends the restructuring by making the debt payable.

The honest objections

"This bails out lenders who charged 9 percent for the risk and now get paid at par." The private lenders get paid what their bonds are worth, which for a bond about to be guaranteed is close to par, and they lose the coupon. The Chinese lenders get paid at par and lose their secrecy. Neither is a bailout; both are the price of the borrower's escape from a rate it should never have been charged. The alternative, a haircut, punishes the lender and leaves the borrower unable to borrow for years; the facility punishes nobody and leaves the borrower borrowing at 4.

"Conditions are the IMF's game, and it has not gone well." The conditions here are three: publish the framework, audit and publish the debt, and build with the saving. They do not prescribe the budget, the tariff or the exchange rate. A government that will not publish its debt has told its partners something, and the facility is not for it.

"A hundred billion dollars in guarantees is a hundred billion dollars of American taxpayers' risk." It is, scored at its expected cost of a few billion, on the record of an instrument that has never been called. The risk is real and the proposal states it. The reward is the century's largest population borrowing at the rate of its partner rather than at the rate of its fear.

"African governments will take the cheap money and the discipline will lapse." Some will try, and the guarantee is called on default, the Compact's benefits are suspended, and the country's page in item 7 will show it. What the facility cannot do is make a government honest; what it can do is make honesty cheaper than the alternative by five percentage points a year.

"The interest saved will not be built; it will be spent." Item 2 requires the saving to be committed by law to the Compact's projects, published annually, and the facility's continuation for that country depends on it. A government that spends the saving on salaries has broken the condition, and the next tranche does not come.

Sources

• Afreximbank, State of Play of Debt Burden in Africa 2024: Debt Dynamics and Mounting Vulnerability; UN Trade and Development, A World of Debt (2025), on African debt service
• United Nations Development Programme, Reforming the Common Framework for African Countries (2025), on the Zambia and Ghana cases
• Congressional Research Service, Sovereign Loan Guarantees, on the Israel, Jordan, Tunisia and Ukraine programmes and their budget cost
• Attijari Capital, Eurobonds: Africa continues its growth momentum (2024), on issuance and yields
• Proposals № 001 (The American Dividend); № 006 (The Marshall Compact); № 023 (The Debt Covenant); № 065 (The Index Rule); № 111 (The Six Hundred Million); № 112 (The Subsea Compact)