Are African multilateral institutions being penalised for their mandates?

In a widely circulated article highlighting tensions in Zambia’s debt restructuring negotiations, African multilateral institutions such as the Trade and Development Bank (TDB) and Afreximbank are reportedly resisting calls to accept losses alongside other creditors. According to reports, the official creditor committee, co-chaired by China and France, has rejected their claim to preferred creditor status, arguing that their lending terms are too commercial to qualify as such. Ghana has echoed this position, with its finance ministry formally requesting Afreximbank to enter restructuring talks, reinforcing the idea that regional institutions should be subject to the same perimeter set by the official creditor committee. This development raises a critical question: Does the global financial system punish African multilaterals for operating within the only structure available to them?

If African-owned multilateral development banks, such as Afreximbank and TDB, are penalised for charging interest rates that reflect market realities while being excluded from the capital subsidies available to global multilaterals, then the current debt restructuring regime is not effectively addressing systemic imbalances. It is reinforcing structural dependency.

The G20 Common Framework rightly excludes Multilateral Development Banks (MDBs) from debt treatment, provided they maintain net positive financial flows during IMF-supported adjustment programs. This principle ensures liquidity support during fiscal consolidation and macroeconomic rebalancing. However, it implicitly grants this exemption only to institutions with access to countercyclical, concessional capital, a structural privilege that African multilaterals, such as Afreximbank and TDB, lack.

Institutions such as the World Bank and the African Development Bank (AfDB) draw on callable capital from shareholders, rely on AAA credit ratings, and secure sovereign guarantees from high-income G7 economies. These advantages allow them to issue long-term bonds at ultra-low interest rates. For example, the World Bank priced its 2020 10-year USD bond at 0.875%. By 2024, rates had normalised, yet AAA-rated MDBs continued to issue at around 3.5% in USD, still significantly below the 5% to 7% range faced by African multilaterals.

In contrast, African multilaterals such as Afreximbank and TDB operate within private capital markets. Their funding comes from syndicated loans and Eurobonds priced at market rates. Even in stable periods, their borrowing costs reflect spreads of 200 to 500 basis points (1/100th of a percentage point) over benchmark rates, with some issuances exceeding that range. For example, in 2021, Afreximbank priced its $700m 10-year bond at T+220bps, while TDB issued a 7-year $500m Eurobond with a 4.125% coupon.

Unlike AAA-rated global MDBs, which benefit from sovereign backstops, rating agencies assess African multilaterals without assuming any systemic rescue. Moody's rates Afreximbank at Baa1, while TDB holds a Ba1 rating. These lower ratings increase borrowing costs and limit their ability to operate as countercyclical lenders during macroeconomic downturns. Of course, internal operational decisions, such as maturity profiles, currency mismatches, and liquidity buffers, also influence market pricing. However, these challenges stem primarily from the absence of institutional support structures that global MDBs enjoy, not from financial recklessness or flawed design.

The IMF and World Bank maintain that only institutions providing net positive flows during adjustment periods qualify for exemption from restructuring. This standard appears reasonable in theory. Although the IMF does not set creditor hierarchies, it facilitates restructuring based on principles of comparability and debt sustainability. However, applying these norms mechanically without accounting for institutional asymmetry reinforces dependency instead of resolving it. Therefore, in practice, it creates a structural bias. By embedding creditor-driven logic within program parameters, the IMF entrenches structural disadvantage unless reformulated to accommodate Southern-led institutions. While institutions with access to subsidised capital and multilateral guarantees can meet this requirement, African multilaterals, operating without such privileges, cannot. The result is a regime that rewards institutional dependency while penalising financial self-reliance.

Critics may argue that exempting African multilaterals from restructuring creates a moral hazard or undermines creditor coordination. However, this argument assumes all creditors operate on a level institutional playing field. True burden-sharing must distinguish between institutions that benefit from global guarantees and those structurally excluded from them.

Given these structural financing constraints, applying the same benchmarks to African multilaterals as to Bretton Woods institutions reflects an analytical fallacy. It imposes uniform expectations on actors embedded within fundamentally unequal financial architectures. As Mehrling (2012) observes, the global hierarchy of financial power determines who can lend during crises and who must deleverage, an asymmetry that continues to shape access and influence. African multilaterals remain judged by rules they did not author, operating within architectures that structurally exclude them. Humphrey (2016) reinforces this by showing how multilateral capital structures embed incentives that consolidate hierarchical privilege. Likewise, UNECA (2025) emphasizes that Africa’s development banks must operate under exogenous credit regimes often dictated by external norms, despite being tasked with endogenous development goals. This structural misalignment distorts performance expectations and deepens financial disadvantage.

TDB President Admassu Tadesse recently warned that including African development banks in restructuring "sets a dangerous precedent" and would damage market perceptions of trade finance reliability. "It is going to affect everybody else who is observing this," he added, referencing the broader implications for regional capital access.

These institutions did not emerge to replicate Bretton Woods's logic; they arose because global MDBs failed to meet Africa's infrastructure, trade finance, and liquidity needs. Subjecting them to restructuring because they "behaved commercially" effectively punishes them for adapting to financial constraints that shield global institutions from similar scrutiny. The official creditor committee argues that because these African multilaterals lend at non-concessional rates and structure loans with shorter maturities and fewer grace periods, they resemble commercial lenders more than multilateral ones. While this argument highlights important differences in financial terms, it overlooks the root cause: African multilaterals are structurally excluded from concessional capital markets and must operate within higher-cost environments to remain viable.

Forcing African multilaterals, such as Afreximbank and TDB, to accept haircuts in sovereign restructurings would likely trigger credit rating downgrades. These institutions rely on maintaining investment-grade ratings to access affordable capital from private markets. Unlike AAA-rated global MDBs shielded by sovereign guarantees, African multilaterals operate without a similar backstop. A downgrade would increase their borrowing costs, reduce their countercyclical lending capacity, and signal deteriorating creditor status, thereby undermining their financial sustainability. It would penalise institutions not for mismanagement but for stepping into a void left by the international system.

Moreover, African multilaterals have demonstrated legal and contractual maturity. For instance, Afreximbank took South Sudan to the UK High Court for over $657 million in unpaid loans related to the pandemic and trade support and won a binding judgment. Although they ultimately settled, the episode underscored that these institutions operate under internationally enforceable standards and uphold creditor discipline, standards often overlooked by sovereign-centric multilateral frameworks.

Of course, this analysis acknowledges governance and operational weaknesses, such as liquidity stress testing, transparency, or board accountability, that may exist within African multilaterals. Nevertheless, while these issues merit scrutiny, analysts must interpret them within the broader context of systemic exclusion rather than using them to justify blanket restructuring demands. Moreover, while World Bank assessments emphasise governance, they apply criteria that reflect donor-driven accountability rather than operational independence. Global actors expect African multilaterals to meet high governance standards, but these standards arise from frameworks designed for Bretton Woods institutions, not from the realities or agency of African ownership and regional development priorities.

If we recall accurately, post-WWII creditor cartels shaped preferred creditor status to institutionalise geopolitical influence through G7-backed institutions, excluding Southern actors from equal participation. As such, the Common Framework now risks serving not as a tool for equitable burden-sharing but as a mechanism for entrenching financial hierarchy. A system that hinders African-led development institutions while shielding their Western counterparts does not reform! It merely reinforces structural subordination under the guise of reform. If left uncorrected, this process could amount to financial recolonisation, not in intent, but in outcome, by replicating historical asymmetries. While it is essential to recognise that global institutions, such as the World Bank, have supported poverty reduction despite complex constraints, we must understand that only by confronting systemic asymmetry can development finance become structurally inclusive rather than merely programmatically effective. True multilateralism cannot thrive in a system where some institutions inherit AAA status, while others inherit exclusion. Equity cannot emerge from a framework that embeds hierarchy at inception.

If the outcome of debt restructuring is reduced lending capacity for African multilaterals, already undercapitalised and marginalised in global finance, then we are not building resilience. We are institutionalising structural subordination under a multilateral mandate cloaked in the language of reform.

Policy Implications
Rather than integrating African multilaterals into existing concessional or partial guarantee frameworks dominated by global financial institutions—structures that have historically reinforced asymmetric power dynamics—the global system should instead shift toward recognizing and respecting sovereign parity.

1. Avoiding Concessional Dependency: Integrating African multilaterals into concessional capital mechanisms risks diluting the very independence these institutions were created to defend. While concessional funding offers affordability, long-term sovereignty demands capital systems that strike a balance between cost-effectiveness and strategic autonomy. Transitional instruments, such as Southern-controlled concessional windows or interest-rate equalisation funds, could bridge this gap. However, such integration must avoid subordinating African multilaterals to Bretton Woods-era hierarchies that reinforce dependency rather than regional financial agency.

2. Rejecting Guarantee Capture: Partial guarantees, though seemingly helpful, expose African financial institutions to external political risk and conditionality. These mechanisms risk replicating the same constraints that previously undermined regional financial autonomy.

3. Advancing Structural Parity: The most principled reform requires revising the Common Framework’s criteria to treat African-owned multilaterals equitably, not solely based on ownership composition but also on developmental function, governance frameworks, and regional mandate. This approach prevents policymakers from conflating functional equity with geopolitical justification, such as the arguments China uses to shield its state-owned banks. Instead, it grounds the exemption debate in institutional purpose and systemic fairness. Unlike state-owned policy banks that advance geopolitical interests, African multilaterals emerged to address specific market failures left by Bretton Woods institutions. This argument does not call for blanket immunity; it calls for consistent, function-sensitive classification aligned with multilateral development norms. For example, reformers could revise the Common Framework to include weighted developmental metrics, such as regional systemic importance or trade finance concentration, to ensure fairer classifications. Alternatively, a bold proposal could extend IMF SDR allocations or grant swap line access to qualified African multilaterals, mirroring the emergency liquidity tools available to systemic institutions.

Conclusion
Institutions should be judged not by the passports of their shareholders, but by the public goods they deliver, the economic value of those goods relative to cost, and the transparency and alignment of the financing mechanisms used to secure them. Structural inclusion, not rhetorical multilateralism, must define the next evolution of global finance.

Dean N Onyambu is the Founder and Chief Editor of Canary Compass, a co-author of Unlocking African Prosperity, and the Executive Head of Treasury and Trading at Opportunik Global Fund (OGF), a CIMA-licensed fund for Africans and diasporans (Opportunik). Passion and mentorship have fueled his over 17-year journey in financial markets. He is a proud former VP of ACI Zambia FMA (@ACIZambiaFMA) and founder of mentorship programs that have shaped and continue to shape over 50 financial pros and counting! When he is not knee-deep in charts, he is all about rugby. His motto is exceeding limits, abounding in opportunities, and achieving greatness. #ExceedAboundAchieve

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