Hello, and welcome to another episode of the Odd Thoughts Podcast.

I'm Tracy Allaway and I'm Joe Wisenthal.

Joe, I feel like has been such an unusual and crazy year with a lot of things going on, that there's actually some pretty important news that hasn't gotten as much attention as it would normally.

If it was any other year, I think a lot of people would be reading about this and talking about this, at least in this sort of investment industry.

Yeah, it's kind of like how, uh, you know, news you might like put out on a Friday and no one really notices it.

It's like all of is like the Friday news dump because you could put there's so much all their stuff to pay attention to, the virus obviously, the econ aomic shock on the election, that no one really has had the bandwidth for anything else.

Yeah, that's a really good way of putting it.

So the event that I'm talking about that I don't think has gotten as much attention as it normally would is basically a debt crisis in Africa.

And this month, let's see, we're recording in November, so this month Zambia actually defaulted on some bonds and it's the first sort of COVID related default by an African nation, and a lot of people expect there will be more.

Even though we've seen some countries, some creditors, the G twenty agree a few efforts to try to help indebted countries in Africa.

There's a G twenty debt service suspension initiative.

But even with that aid, people are expecting distress in Africa's debt market to get probably worse before it gets better.

I I think you're right, like if a ombiean debt default would have been the kind of thing they're like, oh, let's do an episode on that much earlier.

But in a yes, it's certainly gotten less attention than I think it's lost.

You know, it's one of those things where I'm sure even saw the headlines on it, and I meant to ask more questions in a meeting one day, and I meant to click on it and learn more, and I didn't because again I probably had, like, you know, some question about what's going on with the presidential transition or something that took over my mind for the day.

You mean you weren't thinking purely of Zambia.

Believe it or not in a meeting in New York.

So in the midst of all this debt distress in Africa, there's also a lot of attention being paid to China and its role in building up that excess debt.

But also what China is going to do now that Africa is, you know, economically stressed.

Is China going to let up on some of those debt pay amens in the same way that maybe multilateral organizations or other creditors are thinking about doing.

So we're going to get into that side of the African debt crisis quite a bit as well.

But more than that, we're going to talk about how that debt build up actually happened, and we're going to do it in a slightly different way.

We have someone um who obviously comes from Africa, from Liberia, and who had an official role in the Librarian government and a lot of that role involved, you know, being involved in infrastructure projects for which you would incur debt you take out a loan so you could build a bridge or a road or a railway or something like that.

And so we're going to get a different perspective on Africa's debt problem.

Excellent, really looking forward to this.

Okay, great, so uh without further ado, then I want to bring in our guest, JUDEA More.

He's a scene your policy fellow at the Center for Global Development.

He previously served as Liberia's Minister for Public Works and was also Deputy chief of Staff to the President.

So, like I said, a lot of experience in a government position within Africa, and it's going to be fascinating to hear his perspective.

Judy, thanks so much for coming on h morning, guys, and thanks for having me.

It's a pleasure to be here.

So I remember the first time I ever went to Africa.

I went to Mozambique back in two thousand and ten, and one of the things that really struck me, and that I found quite weird at the time was if you were in Maputo, the capital, everything was Chinese.

The cars were Chinese, the trucks were Chinese, the stadium was built by the Chinese.

There were Chinese characters all over the place.

It's really really striking the extent to which China has become involved in the Africa market.

Why has that happened?

Yeah, yeah, And if you had gone to say Ethiopia, you're going to add is you would have saying the same thing, and across the continent and to a large extent, especially even in Zambia that you spoke about, you just saying the same thing.

There's been an extensive growth in terms of Chinese presence and the deepening of Chinese relationship with African countries.

A part of that, I guess it's historical.

One is that, um, you know, at the turn of the century, when you know, would worried about why two K China is entering the w t O.

But and China also on veils is first going out strategy and the only uncontested region in the world in which Chinese, because they weren't as powerful as they are now, could go, was the region of the world in which, you know, most Western policy toward Africa at the time was filtered through the lenses of humanitarian assistance and development.

Africa wasn't seen as a place to go and do business, and for China it worked out perfectly because there wasn't a peer competitor there.

I mean, there were some European engagement, but it wasn't to the extent that the Chinese would do.

The second thing was just the need that was on the continent and what China could provide um so, even up to today, Africa still lags every other region of the world in terms of the provision of infrastructure, mainly paved roads and power.

More than six hundred million people in the continent still lack access to electricity, and so China had this excess capacity in providing infrastructure and and normally provide infrastructure at costs.

Right.

So, before the arrival of the Chinese, the infrastructure space in Africa had been dominated by European firms.

We're talking about your your breed, your if I've the large Vincy, the larger French, spanishi and and to certain extents extent Italian firms.

But the cost of of infrastructure from those firms tended to be high.

And the Chinese came and were able to First, Chinese firms where state sponsored um and so the state owned firms and could therefore they had access to capital that was much cheaper and could provide infrastructure um so at cost that they were competitive in terms of costs.

The second reason was simply because they brought money with them.

In a lot of instances, there were African countries who couldn't afford um to pay for this upfront, and the Chinese were willing to extend loans to them.

Uh and so for for a lot of African countries which at the time didn't have access to international financial markets to issue sovereign bonds and stuff for home development, financing from the model lateral institutions was just not enough, especially concessional financing, and and so with nowhere else to go, they were happy for a partner who seemed not to worry too much about public financial management, who seemed not to care about the quality of governance in terms of corruption, and who said those things were internal and they had nothing to do with that.

And so there was this a confluence of interest between what China wanted to do at the time and what Africas did were and so because of that we saw a huge ramp up in terms of African debt.

The final thing I would say to that also was that it coincided with this huge build up in terms of a boom for commodity exports, and most African economies were growing at you know, seven two, two, nine percent and and and China seemed to have an insatiable appetite for for African commodities, and so it's like everybody was invited to the party, and the party went really well for a while, So lots of things came together in sort of an ideal manner for both parties or for multiple parties.

What years, just to help us frame the conversation, we talked about this boom, and we talked about this build up, this eventual debt build up.

What years are we talking about in terms of when this really got going and when the sort of really hit it hit it transactional pig Yeah, So I would say it started in two thousand at the first FORKAK.

So the FORECACH is the Forum of China Africa Cooperation.

Is this UM is held every three years when and the first one, I think forty three African has a state in governments arrived in China and it's been held every three years, and this is when China says, over the next three years we're going to invest you know, UM five billion, twenty billion.

It went up at the last two forecascas China pless to spend up to sixty billion dollars in Africa.

So the ramp up starts maybe around two thousand and six.

In terms of the numbers begin to increase around and then, but the Chinese arrival in this form that we're seeing begins around two thousand and then the financial crisis of two thousand and AID basically left China unchallenged.

Uh.

I mean, I think a lot of the global recovery was driven by the Chinese uh spending on capital projects and and at the end of that, China was left with this exx capacity that had to go somewhere, and I think a lot of that is what drove even the Belt and Road initiative.

But with that excess capacity, we saw an even significant ramp up of Chinese spending.

So you go back and look at Zambia as a debt profile in terms of the accumulation of death in a place like Zambia, well, most African countries were beneficiaries first of the debt debt waivers on the hippoc right and did jubilie the activity around waiving debt and so come around, a lot of the countries suddenly have significant space to borrow a gain.

And so with China left with this excess capacity, we see this significant ramp up of Chinese lending for infrastructure on the company.

So this is one thing I always wondered, But well, actually, okay, I have two questions.

So first of all, could you maybe describe a little bit more what uh what these Chinese infrastructure deals actually look like and how they work.

So you had things operating under official state sanctioned banners like the Belt and Road Initiative, but you also had private Chinese companies who would come in and tender offers alongside European and American companies or companies from anywhere in the world.

How did those actually work?

And then secondly, if China was financing a lot of this infrastructure build, Africa is still enormously behind on infrastructure obviously, Like why didn't it make more of a difference.

Why aren't there you know, bridges and railway railways and airports and things like that all over everywhere.

I think, first I have to really good question.

I think first, it's just the baseline I mean we're coming from.

You have to remember towards end between and say the year two thousand, that the country, the continent is ravaged about a number of crises.

Right first, there are a significant amount of civil wars, the Liberian Civil War, the Syrian Union Civil War, UM the rewinding general side mulga tissue, even Mozambique.

We talked about this significant amount of wars and a lot of infrastructure is either not built or destroyed during these wars right and then, and because of those those wars, we saw a lot of humanitarian crisis right and and but at the same time, we had an AIDS pandemic that was wiping out a significant number of the population across Center and Southern Africa, and so a significant amount of money that was available went towards the health crisis, went towards just basically beating needs, and not a lot was done in terms of infrastructure.

And so the baseline from which we come means that in spite of all the ramp up we did, we only just scratch the surface.

The African development back now puts the gap in terms of infrastructure finance into around up to a hundred and three billion dollars a year.

So so you can imagine how how deep the whole was in terms of what was available and the way it worked.

You're right, there were like three UM nodes of Chinese engagement where your large state owned companies UM that were owned by the central government UM and then there were your provincial companies, and then finally you had these like quais that profit private companies.

Each of them came with the promise of the back end of Chinese policy banks.

So they were always promised that they could get you access to financing once the government.

I mean, what the required was a sovereign guarantee.

They needed the government to back that loan and if the government did.

And because you have so many actors, it would seem to me, you know, I don't know that as much about how the Chinese system works on their side.

But for example, if I went to the World Bank, UH said the Ministry of Public Works engaged the Work Bank.

Most of that engagement would happen through the Ministry of Finance the Work Bank.

We didn't look at like the areas that portfolio and be able to say you can't afford this.

Right on the Chinese side, it just seemed not to work like that.

So you had multiple Chinese pinis that are competing.

So there's a provincial company, construction company that is access in finance.

Somehow, it has a line of credit that it can extend.

UH it's working through the local the provincial branch of the X and bank, and then you have the large Stadia company, and it seemed as if there were in some sort of a central node that process all of it to be able to say no, it looks like Zambia has taken a lot more debt than the ZIM that can afford you see what I mean?

Like that that didn't seem to be if they're were, it was almost maybe it was ignored or it just didn't exist.

Whatever, the reason was a lot of countries, as a few countries, not a lot of them, like Ya, Zambia as your UH South today and and and and Angola were allowed to ramp up significant amount of debt UH that was tight and to be honest to UH, commodity exports that seemed to be going up and up and up.

And so I would like to add though that beyond the just huge infrastructure deficits, there was another thing driving Africa's need to borrow from China to finance this.

Everywhere else in the world, as a population has either stabilized or its declining, right except in Africa, where the population continues to grow, where more than fifty percent of the population I think is on the nineteen and because this of this huge increase in the population, governments are under significant pressure to provide both you know, hard physical infrastructure and social infrastructure for for these and so they are all of these.

And then Africa's exports tend to be largely on processed natural resource UH products and because of that, there's were so low down the value chain that what accrues to us as value from our exports it's just not enough to be able to finance our infrastructure.

And so because of that, like all of these pressures on governments and the faint I thing I would say to that is all.

So it seems kunto intuitive, but it was like the more the more democratic a country became, the closer it came to China.

Why because when we ran our elections, we you know, promised people that we would build infrastructure because that was the largest need.

And so when the election has ended and we needed to deliver on the promises we made, China was one of the few who had both the appetite for our risk and the resources to be able to lend us money to build the infrastructure we needed.

And so all of these I guess all of these forces and and factors sort of just created this perfect I don't want to call it a store.

We just created a perfect circumstances m for for for this Chinese lending to to Africa and UH and in Africa borrowing from from China.

So there was no entity, whether it's on the provincial or policy bank side in China or the government of the various African countries that were the recipients of this UH loan money and infrastructure capacity, no one had an incentive to do any sort of meaningful UH debt sustainability.

And now it sounds like that, doesn't it.

It just seems it seems that well, on our side in Liberia, we really didn't have We didn't really have the option to do that because you see, we we just come out of war and almost five billion dollars of our debt had been waived.

But that meant we had to enter an IMF program, which meant at the Ministry of Finance in Liberia there was a person there from the i m F who reviewed our debt profile and UH and in Liberia we have something called the Debt Management Committee that reviewed every application for for debt from say an agency of government ministry and measured that against our death stock and and this death servicing, and we just come back to say we just couldn't afford this.

It doesn't seem that that kind of infrastructure and that kind of you know, institutional arrangement existed across the continent, and instances where it did, it just seemed like the incentives were in alligned for people to actually give it the power to operate at its shoot.

Then on the Chinese side, it just um, you know, um, there didn't seem to be a significant effort.

It looks like that's changing now that it started to change around the eighteen FORCAC, when the sum being began talking about you know, we're no longer going to finance you know, advantage of projects or political projects called them.

I think something started to change about it.

It might have been because of domestic reason.

It might have been China's own position in terms of how much capital it had to be able to expand overseas.

Something began to change.

But in those you know, in the heyday of of borrowing that has us in the crisis that we're in now.

In a number of African countries, I would say maybe like seven in which Chinese debt is actually a either of debt distress, um that that didn't seem to be on the Chinese side, and some sort of coordination to be able to take And the final thing I would say on that is that we know that China has been sort of like a reluctant multilateralists.

That China was not a member of the Paris Club, and the Paris Club of Rich countries had had des sustainability rules, and because China wasn't a part of it, it wasn't really subject to this rules.

Reluctant multilateralist is a great way of putting it.

UM.

I want to I want to talk more about how China's approach might be changing, especially the summer during the debt crisis.

But before we do, I mean, I think we have to talk a little bit more about the loans.

So there is a perception that China's loans tend to be or its financing tend to be unfair in some way, or they come with a lot of strings attached, and that you know, China maybe doesn't necessarily care about debt sustainability because it's trying to um, how do I put it, like it's trying to get a hook into a particular country or into a particular resource or a strategic port or something like that.

So it's not necessarily worried about getting paid back.

So how much is that reputation deserved in your view?

So I think it was First it was an Indian writer writing an outfit in an Indian paper who coined the phrase dead trapped diplomacy.

And then the US in its uh great power competition with the with the Chinese simpler ramp ramp that up.

And thing my understanding of the narrative of that trap diplomacy is that the whole plan is for China to ensnare is as um is putitive partners in this unhealthy relationship as a means of being able to take over flagship infrastructure like ports and airports just off like that.

And the example that gets bandied about is Humbun data, you know, in in the UH is Sri Lanka, Yeah, in Africa.

So there's been a lot of studies.

They China Africa Research Initiative at the Johns Hopkins University has done a study on this, and there's no real there's no evidence for this.

It gets repeated often, but there's no real evidence for this.

The second thing I would say on this question is that about seven countries in Africa, seven or eight the dead crisis they have currently, the dead distress, China plays a role, right, so in terms of Africa's student deaths that China is responsible for about UM about of it.

So it's sort of seems like we we've become so consumed we're talking about and not focused on the right.

A significant portion of the debt UH is old to domestic UM creditors and to private creditors, and then the rest of it is UH the multilateral UH lending agencies, and so I it's worked really well to the US is advantage in terms of painting China as this irresponsible lender who's out to take over UM.

The infrastructure of the countries is supposedly UH it is working with that that it hasn't really borne out in terms of the evidence that this is what the Chinese.

But the question is, I think the critique of Chinese lending at a scale and pace that was just completely sustainable, especially for for economies who were dependent on commodity exports, knowing the fluctuations of commodity exports.

I mean, I think COVID nineteen simply ended up being an excellerent of a crisis that was coming anyway, right, and and so we just didn't expect it to be this shock, but it was coming anyway, and and and Zambia had all has been there.

I would also like to point out that Zambia is a bit different right from from other countries in terms of how quickly the debt ramped up in Zambia and how much that it actually had, and how dependent it is on a single export um copper.

I think we were fortunate enough that the picture out of Africa after the Zambian debt default is going to be mixed.

So on Friday, at a Thursday of Friday called Devoir went to the market, becoming the first African country I have since COVID to issue your bonds and it was five times oversubscribed.

So it appears that the market is being really nuanced and sophisticated about the risk that African countries present.

And there still seems to be some sort of appetite for for African debt.

And so I think China as as a factor in Africa.

Again we're talking about fifty four economy is in China being a significant imp up part of maybe seven or eight.

And then if you take out Angola, China's influence drops in elect significantly because a significant portion of Africa's debt to China is actually Angola's debt to China.

And then of course you have your Kenya that's changing because you know, at the last forecast, Kenya went with the hope of getting more money for this second and final portion of the standard gage rail from you know, it's currently it comes from ambassador to Nairobi is supposed to go further than that, and and the Chinese played hardball and didn't because first the current one is not able to pay his bills, is the debt is very difficult for them to service.

In fact, there was a committee in the Kenyan parliament who suggested go back to the Chinese to say, look, we're in over our heads.

We can't do this.

Um the DS as I you mentioned, Kendya initially didn't want to participate because Kenya still wants to retain his access to markets.

But Kenya is strongly reconsidering that decision at the moment.

So I and I think, uh, just paint China as the driver of debt, especially with you know, nefarious intense.

It's just the evidence just really really doesn't bear that up.

So Chinese debt is an important contributor to the total of dead stock, but it's not the only story.

I want to go back to something you said, Um a little bit earlier on, and we were talking about this perfect storm of there being an opportunity um China looking at Africa and saying there wasn't really any sort of other main entity there from a business standpoint.

Most of the Western dollars came more from a born aid perspective than an investment perspective.

Is there a strategic opportunity now?

Or is it just never made any sense?

I mean, if if the countries where China has been very active um in lending or largely commodity exporters, obviously China has this voracious demand for these commodities, Do other sort of Western players, whether it's the U S or countries in Europe, have much of a sort of strategic business reason to invest aggressively in Africa or do they just not have the same UH calculations that would lead them there in the first place due to their sort of different needs of their economists.

Sure, and just quickly before I responded out, just at that.

Part of what drove you know, China's investment in African resources was also the needs to have access to the resources at source, right, because China could always buy them on the international marketing to buy them from Glencore, right.

But but they certain mineral resources will consider strategic and and and they want the Chinese companies controlling them, and so that that drove that.

I think this is a question.

I'm glad you bring up this question about, you know, beyond China or is there a strategic reason for others to to be engaged with the continent now.

So one of the things that we that we've seen is the rise of these continent sized economies, right that dominant the global landscape now in terms of the political economy of the world.

So you have the United States, you have the combined EU, you have your China, you have India and in their dominant and compared to Africa, where you have fifty four fragmented, very small states.

I mean, the largest economy in Africa is Nigeria, but Nigeria's GDP is still smaller than the Washington DC area, right, So it's I mean, it might be large for Africa, but in terms of a global scale.

It's it's really not.

I mean, it's just how it has a lot of people.

And then up to ninety percent of Nigeria's revenue come from oil exports.

So Nigeria's large economy is is pretty fragile, especially because now we're going to a post carbon economy.

So what the African leaders, but they understood their inherent weakness of acting as individual units, and so they decided to create something called the African Continent of Free Trade Area, who would combine all of their markets into a single market.

And we just by doing that become a three trillion dollar market.

So now it makes Africa attractive as a place to invest because initially, if you were going to invest in any country, you had to and wanted to scale up across the continent, you had to, you know, deal with fifty four if you wanted a presence in our countries.

But fifty four regulatory environments that it's just way too expensive and and you know, the payout the dividend doesn't seem to match the cost.

But because now it's going to be a single market, um, it might be more attractive, right, And so I think with that change, it's really really important that people begin to take a second look at Africa.

The second thing is, you know, over the last ten months, um, the large economies, I mean they've spent close to uh it's ten to twelve trillion hours propping up their economies against the economic fallout of the coronavirus.

It means that when the recovery does come for a long time, we're gonna see very low or negative interest rates in the developed markets.

And because of that, I think the risk profile or the risk appetat of investors and private money will change, and Africa presents an opportunity, especially you know, for infrastructure and and the long term returns on infrastructure.

I just saw it's in the Financial Times that by the end of the summer, investors has poured close to seventeen trillion dollars into negative year bonds.

I mean that cannot continue indefinitely.

And so I think Africa presents um, you know, with you know, five just seven percent interests.

I think Africa still presents an opportunity for for investments.

So there is uh that.

The second thing is, you know, the State Department two weeks ago or about maybe eight days ago, released the policy planning Department Bureau at the State Department released this report on on the chance that the China challenge, and it lists at ten things in terms of how the US is going to organize itself to that China's conduct is the reason China poses a challenge in China's model of leadership and and one of the places what we've seen really growth with setbacks sometimes yet but in terms of the democratic space has been in Africa, and and I've argued elsewhere that the Chinese model of governance, it's desirability or applicability is pretty limited in Africa.

And so I can imagine where the democracies of the world, like the US and and and much of Europe would see Africa as a place where there's some sort of shared community or values of source and that itself is reason to to be able to and define.

The thing I would say is, like you know, as I noted in my comments earlier, I mean parts of Eastern Europe has been decimated because of the the population question, and that's going to affect Western Europe too, and so the only place that will be vibrant with a young population that's working is going to be Africa.

And so I think this is something the Chinese saw and the we're able to make a long term bet on the continent UM twenty years ago when no one saw Africa in a place where you could even think of investment, and today you know, we're seeing that.

So I think they're they're there are opportunities for growth, especially in the infrastructure space, especially in the agriculture and agric process in space that UH one would expect Europe, Africa's neighbor right to to have an interest in investing there, and and of course UH the United States to invest in there.

What I do see though, is that China is just continuing to deepen its hold.

So the Chinese Foreign Minister has already promised that China will provide support to the African Continental Free Trade UH Area the secretariat or provide money for training, and Chinese state media is already entertaining the idea of linking the African Continental Free Trade Area to the b r I and bringing Africa closer into China's here.

So I think that there is there are reasons both economic and strategic for um UM actors other than China to pay attention to what's happened in Africa.

So I wanted to talk a little bit more about what's been happening this year and sort of over the summer.

So the distress in African debt is well known, and we've seen the G twenty react um as I mentioned in the intro, but I think one of the sticking points are one of the discussion points has been the behavior of the Chinese, whether or not they would agree to some sort of stand still on on debt payments or basically act like other creditors um, like the multilateral creditors.

How big of an issue is that and do you see signs that China might be softening its stants on this front.

It is a huge issue, and we've heard incuragan things, but it's it's yet to be seen.

So if you go back to this Zambia story, Zambia had gone to his creditors, the private creditors, and asked for a standstill deferral.

They decided they were going to meet.

They put it off to November thirteenth, and then around they came back and said no, and and so the design and then the recriminations right so on the Zambian side, the Zambian Finance minister said that the private creditors refused to sign an n d A, and the private creditors wanted to know what kind of arrangement Zambia was having with China, because the fear was we would defer the debt, we would defer payments and then Zambia is simply gonna pay the Chinese.

So they wanted to see But China, as I noted, as a reluctant multilateralist, and China prefers doing these things on a ball at run basis.

Unfortunately, this is not just one of those times, right and because of the scale of the crisis and and the number of actors, it is just not amenable to a ballad le discussion.

But China insists on going the balladd ra way, and so because of this, the private creditors just felt that there just wasn't enough information, especially about what China was doing for for them to make any decision on that, and so that remains an issue.

The second thing was China x him.

This isn't really a huge problem in Africa, but it's a huge problem with the dss I total.

China is arguing that it's a China Development Bank and other policy banks are lending on a commercial basis, and so they ought to be treated the same way private creditors are being treated.

That the only Chinese, only Chinese lender who might participate in this is probably a China Xim well.

But China Development Bank is a huge player now in Africa.

In Africa it lends money into a goal on maybe and so China is is just trying to draw a line between what is you know, a national a state creditor and what is a private creditor.

And so because of this, China has not been as as you know, eager to participate in this process as one would like.

The final thing I would say is that you know, after the last dead crisis, most of the Western Oy City Paris club members have moved away from baladteral lending.

So I think seven to two of of death servicing over the next four years are the Chinese lenders.

And so because of that, China is a dominant player in this new death crisis, not just in Africa but just generally, and in China has hesitation to two.

Part of it is China has way more to lose, It's way more leverage right then most of the the G twenty.

So we keep saying G twenty, But if seven seven two is going to China, are we is there really a G twenty right in terms of the dead question, it's it's really China.

However, the saudiast who chaired the G twenty now said that they had agreed in principle on a framework to handle something debt that will be useful going forward, and supposedly the Chinese, the Chinese on board on board with this.

But again, I mean, in the past, China has you know, said uh, but they make these general comments that could be yes or no or maybe so we were it's yet to were yet to see if China is as committed to this new framework or if China is going to be more active in in in this in this space.

But it remains that China is such a dominant actor here and that China's hesitation to to fully participate is a significant storyline in the debt crisis.

So does this create a sort of I mean, it sounds like there was some whole in the existing sovereign debt law or some ambiguity the situation that allowed the dispute about whether the lending should be characterized as private sector lending or official sector lending.

What does a sort of updated version of sovereign debt law looked like so that going forward, Uh, there's more clarity on how these things are characterized.

Yeah, it just seemed, you know that after the first UM more sometime around thirteen that the I M f UM would have I think, I'm not even I wasn't even finance ministering like there, right, I just happened to sit within the presidency and then control of ministry that was pretty big.

Every time there was an IMF mission in Liberia, they met with me as one of the largest spenders in terms of the government, and so everybody knew that the issue of serving debt, especially for countries that were just coming into the market, would be an issue, and for some reason there was never sort of nothing created in terms of an international mechanism to be able to resolve this when it did happen.

So this framework would be that.

But I think the difficulty with with any framework, of course, it's going to be when when when could bevore cells debt for a billion dollars or billion euros?

The people buying that debt are you know, pension funds, hedge funds, private creditors who you know, have finisher responsibilities, responsibilities to their their investors and the people whose money and they're investing.

So this isn't just countries.

I mean with countries, well you know, the legislature and there's stifican make a decision here.

Because of the strange mix of creditors we have, it creates this UH difficulty in terms of hot one arranges this.

So in terms of what this looks like, it's it's really unclear to me what what what a new mechanism looks like.

UH and to be able to handle this, because this is going to happen as long as these frontier markets continue to have access to UH international financial markets in terms of in terms of debt, We're going to see this happen again.

It might be from shops within the economy or external shocks, but these are gonna happen.

So how we restructure the international system so that this doesn't happen?

To be honest, I don't know.

I'm just one of the guys on the sideline who's saying, you know, we need to do this, And when you ask me how, be like, oh, I don't know, um so I think, but I'm confident that people who are way smarter than me are thinking about this.

UM.

But insofar as Africa is concerned earned it's investment, it's infrastructure gap doesn't go away.

It's weakness in terms of financing that infrastructure from his budget doesn't go away.

And so I think, UM, this is just a pause in and in an exorable march toward more day and and and I think it makes sense that this framework that the salady.

We're waiting to see what the framework looks like.

And so maybe we can have this conversation again when the framework comes out to see if it is adequate UM to be able to resolve these kinds of tensions when they arise in the future.

Judy, I think that's that's probably a natural place to leave it.

UM.

But thank you so much.

That was a really interesting conversation, and really appreciate your perspective.

Listen, I am really really happy you reached out and I'm glad you have participated in this.

Thank you.

Yeah, that was fantastic.

Thank you so much.

So, Joe, I found that conversation very very interesting and timely.

And I feel I feel a little bit bad because I feel like this is a subject that we probably should have gotten to much faster.

But again, as we discussed, given everything that's happening in there's just lots going on.

But I also thought Juday's point about how China is very active in Africa obviously, but that even the sort of private sector deals, loans that were coming from companies or you know, deals that were struck with with private companies were in some way or another they end up being financed by the Chinese state.

And if you have a private company competing with a state funded entity, that cost is almost always going to be uneven, and I think the state entity is almost always going to win out.

And that was that was one reason for China's UM I guess advantage in African UM financing that I hadn't considered before.

Yeah, no, that was that was extremely interesting and I hadn't either this sort of like straddling the line, I guess and look, I mean it fits even when we talk about China domestically and this sort of ambiguous nature of the banks and the degree to which their private enterprises but also UM but also serve policy purposes and policy.

Economic policy in China domestically, as we've discussed before, is often conducted very directly through the banks, and so I get I think it's interesting to talk about it from a sort of external standpoint, is kind of being the same thing.

It's like this sort of unique Chinese UM financing approach, and this was the sort of the first time we've discussed it sort of outside of China's borders, but fundamentally it sort of it's the same thing in some way.

Yeah, and Juda's point about how, you know, we talk about China having extended a bunch of money to Africa, but of course it's it's much more nuanced than that, and it's really seven countries that account for the bulk of that financing, and then one in particular, Angola.

I think that's a point well taken.

But I think the reason everyone's talking about China now or over the summer is because of how it's playing a part in these debt restructuring talks right and there.

There are even some people complaining that, you know, no other creditors are going to agree to a deal if they think that China is going to be the holdout, and so any money that you know, African nations do have ends up getting diverted to China before the rest of the group.

So it even if China sort of has a smaller role than many people think, it does have an outsized role in these particular debt negotiations.

Yeah.

No, that's uh, that's really well put.

And now I feel like that conversation, Um, it cleared up a lot of things for me, I would say.

And I think also, you know, it's obviously that particular sort of dead build up and boom, the sort of perfect storm that occurred with African commodity exporters voracious demand for commodities from China, like that specific set of scenarios may not be repeated imminently anywhere else.

But I mean, obviously China still has um ambitions in terms of expanding its trade and also expanding consumer destinations for its own exports of finished goods, and so the sort of fundamental questions of how commodity Chinese investment works and what makes sense for other countries to accept that obviously isn't going away.

Yeah, I gotta say, I do hope they finished that that railway in Kenya because that would be very, very helpful.

And I can speak from personal experience that when the railways aren't working or there is no railway.

Actually going along the highways can often be a very very stressful um and extremely dangerous UM proposition.

So I am looking forward to some infrastructure development in Africa once we can all travel.

I hope you get to.

I hope you get to.

I don't see that in my uh, in my path anytime soon.

But you know we've you're more of a globe trotter than me, and so for your sake, I hope you get to experience that finished railway.

Sometimes you don't think I'm going to go on like a Kenyan railway in unrealistic maybe two, I don't know, but I'm sure you'll have a wonderful Instagram pictures of it regardless.

Thank you.

All right on that note, Uh, shall we leave it there?

Let's leave it there?

Okay.

This has been another episode of the All Thoughts podcast.

I'm Trade the Alloway.

You can follow me on Twitter at Tricy Alloway and I'm Joe wi Isn't all.

You can follow me on Twitter at the Stalwart, and you should follow our guest on Twitter, ju Day More.

He's at ju day More.

Ju Day's about g y U d E underscore More.

Follow our producer, Laura Carlson.

She's at Laura M.

Carlson.

Follow the Bloomberg head of podcast, Francesca Levi at Francesca Today, and check out all of our podcasts at Bloomberg under the handle at podcasts.

Thanks for listening.