UK government launches group to tackle sovereign debt in developing economies

By Libby George

LONDON (Reuters) -The British government has created a coalition to bring together the private sector and government to help developing countries make their sovereign debt more sustainable and continue to access private investment.

A wave of sovereign debt defaults following the Covid-19 pandemic, and a global interest rate hiking cycle, have largely crested, but dozens of countries are still grappling with precarious debt repayment costs.

London and New York are the legal location for the bulk of the world's bond lending to sovereign states, and most bonds to African governments are domiciled in London.

Key priorities of the London Coalition on Sustainable Sovereign Debt will include making debt contracts clearer and more transparent, improving the way loan terms address natural disasters, and addressing problems with group lending practices, the UK Treasury said in a statement on Monday.

It also said that encouraging fair and open debt restructuring, and "more resilient borrowing practices", would help expand potential markets for the UK and improve security.

The new group will be co-chaired by Emma Reynolds, economic secretary to the Treasury, and Jose Vinals, a banker and economist who was most recently the chairman of Standard Chartered.

The grouping was launched just a week before the United Nations Financing for Development conference, a once-in-a-decade event which kicks off in the Spanish city of Seville on June 30. The launch also comes amid historic cuts to aid and concessional finance from wealthy nations, including the UK and the United States.

Among measures suggested in a recent Vatican-backed report on financial reform were legal changes in London and New York that would prevent lenders from slowing down debt restructuring negotiations when countries default. Neither jurisdiction has so far adopted the measure.

(Reporting by Libby George; Editing by Rachna Uppal)