Abstract:
The current arrangements through which African sovereigns raise and manage the external finance for
sustainable and inclusive development in their countries are functioning sub-optimally. This troubling
situation suggests that Africa needs a new approach to managing its sovereign debt and to restructuring
the debt when servicing it becomes too burdensome. This paper argues that Africa is currently facing
five challenges in regard to its sovereign debt and that addressing them requires a new conceptual
framework that facilitates reaching an Optimal Outcome. This is defined as an outcome that, taking
into account the circumstances in which the sovereign debtor and its creditors are negotiating their
transaction and their respective rights, obligations and responsibilities, offers each of them the best
possible mix of economic, financial, environmental, social, human rights and governance benefits.To
make this case, the paper will focus on the case of sovereign debt restructurings. These transactions
most clearly demonstrate the complexities and the challenges involved in reaching an Optimal Outcome
in sovereign debt transactions. The paper is divided into 3 sections. The first section focuses on the
five challenges that African countries are facing in managing and, when necessary, restructuring their
sovereign debts. The second proposes eight principles, the DOVE (Debts of Vulnerable Economies)
Fund Principles, that together offer a new conceptual framework for negotiating and drafting both
new and restructured sovereign debt agreements. This new framework will help the sovereign and
its creditors reach an Optimal Outcome. The third section draws some conclusions.
