A country that is unable to finance its projects through internally generated funds, such as disposals of government assets, tax collections, and other forms of government revenue sources, may opt for either internal borrowing from private creditors or external borrowing from foreign creditors. When a government borrows funds to finance its projects, the debts are referred to as national debt or government debt that is indirectly owed by the country’s citizen. According to the loan agreement, the government is expected to repay the back the principal amount and the interest accrued on the loan. However, some countries may request for rescheduling of interest for different reasons. Interest rescheduling is simply restructuring the interest repayment terms by extending the repayment period. Some of the countries with major interest rescheduling of their national debts in recent years are looked at below.
Afghanistan’s economy has been affected by years of wars, civil unrest, and tribal conflicts. The country depends on external financing to conduct most of its economic activities. The country is defined by International Monetary Fund as a debt crisis country. The country’s high borrowing and the continued economic struggles have made it tough for Afghanistan to repay the loans on schedule. In 2010, the country borrowed from 19 Paris Clubs of creditors to finance economic recovery program, meet the food demands in the country and to finance military operations. However, since the loan had not achieved its objective, the government had to request for both principal and interest rescheduling. In 2014 a total of $15,869,000 in the interest of the national debt was rescheduled through the intervention of IMF and World Bank thus easing the debt burden in the country.
In recent years, Haiti has been hit by a series of earthquakes and hurricanes, inflicting massive economic losses in the country. The country incurred $7.8 million economic loss as a result of 2008 twin hurricanes attacks. Due to the devastating effects of earthquakes and hurricane, the government of Haiti had to borrow from external sources to finance the country’s restructuring and to feed the affected families. The government borrowing was mainly from, World Bank, Inter-American Development Bank, and the International Monetary Funds. Since the country took long to recover from the after-effects of hurricanes, the country was not able to repay the principal amount and the interest on the amount borrowed. Through the Highly Indebted Poor Countries (HIPC) initiative in 2014, the World Bank, IMF, and Paris Club accepted to the rescheduling of an interest of $21000 of the principal amount borrowed.
Ivory Coast, 2013
In 2013, Ivory Coast's total interest rescheduled on national debt was $93,502,000, according to a World Bank report. Ivory Coast’s borrowing dates back to the 1970s, when the country embarked on various development projects. Faced with the failing economy and commodity prices especially after the civil war, the government of Ivory Coast requested the Paris Club donors to reschedule the debts. The request was granted, and the above interest on the principal amount was rescheduled and spread across nine years.
Other countries which had their significant interests on the principal amount rescheduled in recent years include Sudan, Comoros, Mauritania, Mozambique, and Ghana. Combined, more than $50 million in interest were rescheduled for these countries in the year 2013 alone.