Sovereign Loans Program
What we do
In Budget 2018, Canada allocated over $600 million to deliver the Sovereign Loans Program (SLP). Through this five-year pilot program (2019 - 2024), we provide low-interest sovereign loans, primarily to middle-income countries, to support their investments in poverty reduction and peace and security.
Through the SLP, Canada aims to generate beneficial social, economic and environmental outcomes that would not occur in the absence of sovereign lending. All initiatives must contribute measurably to the achievement of the Sustainable Development Goals and be aligned with at least one of the six action areas of Canada’s Feminist International Assistance Policy. Lending decisions are made with the economic development and welfare (including peace and security) of the recipient as the main condition of lending.
The department will work to ensure that initiatives funded by the SLP are aligned with international best practices on debt transparency and are not contributing to unsustainable levels of debt in recipient countries. The SLP will work closely with Finance Canada, who leads on Canada’s international debt policy and represents Canada at the Paris Club.
Our approach to sovereign lending
The SLP provides sovereign loans on concessional terms to eligible recipients, tailored to their needs and priorities as they relate to poverty reduction and peace and security. The SLP improves the breadth of support Canada can deploy, and aligns Canadian international assistance with other leading donors.
Global Affairs Canada negotiates sovereign loan terms and conditions on a case-by-case basis with eligible borrowers. Those terms must fall within the following parameters:
- Maximum loan term of 10 years;
- Fixed interest rate equal to the Government of Canada’s cost of borrowing;
- Principal and interest payments must be made on at least an annual basis;
- Loans can be issued in CAD, USD, GBP, JPY, or another currency identified by the International Monetary Fund as an official foreign exchange reserve currency; and,
- Total outstanding loans made to or guaranteed by a country under the SLP cannot exceed 20% of the loan portfolio or $120 million, whichever is greater.
Canada can only enter into SLP agreements if the recipient or the guarantor of the loan is the government of a country that is:
- Included in the Organisation for Economic Co-operation and Development (OECD) Development Assistance Committee List;
- A borrowing member of the International Bank for Reconstruction and Development of the World Bank Group; and
- Considered creditworthy, taking into consideration World Bank and International Monetary Fund debt sustainability analyses.
The SLP will program in borrowing democratic countries and place an emphasis on those that seek to improve their democratic status. Where possible, loans provided through the SLP will focus on countries and sectors where Canada has an existing relationship with the borrowing country. This will allow the SLP to build linkages across the department and tap into the knowledge, expertise and networks that exist within our bilateral programs and across the mission network.
Further details of the SLP’s operational programming can be found on Global Affairs Canada’s project browser
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