Sovereign debt stress is a significant concern for many emerging markets and developing economies. The recent World Bank International Debt Report highlights major challenges ahead, with most debt stemming from market borrowing, traditional development lenders, and newer Chinese lenders. A new set of creditors, Southern-led multilateral development banks (MDBs), has emerged, growing rapidly and becoming important lenders in their regions. These MDBs, unlike the legacy MDBs such as the World Bank, have different shareholdings, governance, and operational priorities.

Currently, Afreximbank and TDB, two Southern-led MDBs in Africa, are involved in debt restructuring discussions with Ghana, Malawi, and Zambia. These MDBs argue that their loans should be excluded from restructuring, similar to the World Bank and African Development Bank, but this view is contested by other creditors. This dispute is delaying debt restructuring in these countries and raises deeper questions about global governance and the evolution of the international finance architecture.

This working paper explores these issues, examining the ongoing restructurings and the broader evolution of Southern-led MDBs, and offers policy considerations.

Report by the Overseas Development Institute