As the global economy is moving towards recession, African countries, where China has leveraged lopsided loans for geopolitical gain, are in debt distress and need alternatives fast, Nikkei Asia reported.
Last month, Kenyan officials said they would ask China to extend the repayment period on USD 5 billion worth of loans, with an incoming cabinet minister telling parliament that the debt is “choking” the country’s economy.
According to Nikkei Asia citing research by Johns Hopkins University’s China Africa Research Initiative, Beijing’s financiers had lent over USD 153 billion to African public-sector borrowers over the past two decades.
Only USD 3.4 billion of interest-free debt was cancelled over that period.
Earlier, in August, China made an announcement that it would forgive 23 interest-free loans granted to 17 African countries to only show its grip over the east African sovereign debt has become, reported Nikkei Asia.
China shows the African countries a dream of bringing Beijing’s infrastructure miracle to the continent but in reality, it just increased their expenditure. For example, the railway between Nairobi and Mombasa was financed by Beijing’s USD 5 billion loans.
Foreign Minister Wang Yi’s stony silence on just how much had been forgiven and to which countries speak to the secrecy of Chinese lending and the opacity that makes its debt traps so intractable.
According to Nikkei Asia, currently, China holds the financial fate of much of the Global South in its hands, accounting for almost 40 per cent of the bilateral and private-creditor debt payments the world’s poorest countries are due to make this year, according to World Bank Group President David Malpass.
Preoccupied with its own domestic debt crises, China is unlikely to soon clean up its debt mess in Africa.
In the African continent, Djibouti would be probably the country which owes more Chinese loans than any other nation. Its total debts to China equate to around 43 per cent of its gross domestic product. Coincidentally, it hosts China’s only overseas military base, reported Nikkei Asia.
Ethiopia, Africa’s second-most populous country, is struggling with USD 13.7 billion in Chinese debt, according to Nikkei Asia citing data compiled by the Global Development Policy Center at Boston University.
Meanwhile, Kenya is labouring under USD 82 billion in debt. The loans Nairobi took out from the Export-Import Bank of China to finance the railway to Mombasa carry terms of 15 to 20 years, but officials say decades more time will be needed for repayment, given that the line is unlikely to be profit-generating even after 50 years.
The spreading troubles with Chinese loans speak to the importance of transparency, accountability and fairness in global lending. Around half of all Chinese loans to Africa remain hidden, according to estimates by AidData, which has the world’s largest data set on China’s development financing.