Improving Governance in Africa
What does Preferred Creditor Status mean?
For the public sector exposures, Preferred Creditor Status (PCS) means that the repayment to the Bank,
generally, takes precedence over other creditors in the event of sovereign default. In other words,
according to the PCS, AfDB ranks higher than other creditors in case of default. Rating agencies take this
specific feature in their assessment of Multilateral Development Banks.
For the private sector exposure, the Preferred Creditor Status has a different benefit. In case of
restriction of access to the foreign currencies by the sovereign, rating agencies consider that this
restriction will not apply for the repayment due to Multilateral Development Banks. This provides strong
mitigation to the Transfer and Convertibility Risk. For example, in case of a default or a near default of a
country on its financial obligations, it may restrict the private sector access to foreign currencies but this
restriction will not apply in case the money is meant for the repayment to the Bank.
83View entire presentation