While the African continent is third overall in the Chinese debt list, individual African countries stand out as borrowers. In fact, African countries make up half of the top 50 nations most indebted to China as a percent of GDP. Djibouti, the Republic of the Congo, Niger, and Zambia are all in the top 10.
With the coronavirus crisis exacerbating the economic crisis in Africa’s low-income countries, economists and other experts argue that debt relief is essential.
As recently as 2016, Chinese lending to the public sector in Africa was US$28B. It declined to US$9.9B in 2018 and declined again to US$7B in 2019. Over the last two decades China has emerged as the continent’s largest bilateral lender, committing US$153B to over 1,140 projects in Africa, with power and transportation, where Africa has the greatest deficits, accounting for about 55%.
What is the scope of the G-20 effort in Africa?
In total, 38 African countries are eligible for G-20 debt relief. Altogether, they owe US$25B in 2021 repayments alone. So far, 31 have requested relief.
As the largest contributor to the G20 Debt Suspension Initiative, China has written off matured interest-free loans for 15 African countries.
While proactively extending assistance to more African countries, China has also enhanced the approval and regulation on lending, by improving its working procedures.
But that’s not all of Africa’s debt trouble. Multilateral lenders such as the World Bank or the International Monetary Fund, amongst others, constitute 20 percent of Africa’s debt service this year. While these lenders are undertaking some efforts to help countries repay their own loans, they are not relaxing repayment requirements.
Likewise, bondholders, who are responsible for 19 percent of 2021’s debt service, have held back from providing any debt relief. For many African countries, the combined effects of these debt burdens are disastrous.
Before the pandemic, China negotiated debt relief bilaterally, without consulting the IMF or other creditors. Now, the G-20, including China, are jointly setting the terms of debt relief, and moving forward, the G20’s Common Framework will coordinate the joint negotiations of official bilateral creditors.