As a result of the Covid pandemic, many African currencies depreciated, which in some cases has led to ballooning sovereign debt burdens when expressed in local currency. Such a situation can be avoided, argues Ruurd Brouwer, CEO of TCX, in Africa News Agency (ANA).
About fifteen years ago, many Polish homeowners chose to take out their mortgage in Swiss francs. The depreciation of the zloty doubled the value of the loan in local currency, pushing many of them into over-indebtedness. Polish borrowers appealed to the European Court of Justice, which ruled in their favour under the Directive on unfair terms in consumer contracts.
Low-income countries borrow in hard currency, the World Bank, the African Development Bank Group and bilateral donors offer them no choice. Their currency often devalues much more than the Polish zloty, making their debt unpredictable and pushing many African borrowers into over-indebtedness today.
Why aren’t the poorest countries as well protected as Polish consumers?