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The Liquidity and Sustainability Facility for African Sovereign Bonds: a good ECA/PIMCO idea whose time has come?

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  • Gabor, Daniela

Abstract

This paper maps the balance of benefits and risks underpinning the ECA/PIMCO proposal for a Liquidity and Sustainability Facility that would provide “concessional” repo financing to private investors in African sovereign bonds. In market speak, investors would finance their African sovereign debt holdings with LSF repo loans. The brief first examines the macrofinancial risks for African government bond issuers and for central banks that the LSF repo instrument engenders, as well as the developmental impact of a private-finance-led development paradigm that seeks the structural transformation of local financial systems towards bond-based finance. It then fleshes out the “Reform” and “Rethink” approaches to the ECA/PIMCO proposal. A reform of the institutional design of the LSF can minimise these macrofinancial risks. The Rethink approach in turn maps out alternative development pathways that prioritise local development banking instead of bond finance.

Suggested Citation

  • Gabor, Daniela, 2021. "The Liquidity and Sustainability Facility for African Sovereign Bonds: a good ECA/PIMCO idea whose time has come?," SocArXiv erku6_v1, Center for Open Science.
    • Handle: RePEc:osf:socarx:erku6_v1
    DOI: 10.31219/osf.io/erku6_v1
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