Zambia has cancelled US$ 1.6 billion Chinese loans to void Beijing’s debt trap. The southern African country has also managed successfully in negotiating a $1.4 billion IMF bailout to restructure some $17 billion external debt. In November 2020, the country defaulted on a sovereign loan, and then in February 2021, Zambia applied to be considered under a newly established process set up by the G-20 called the “common framework” designed to help countries weather the storm of COVID-19 with debt relief and restructuring.
China is Lusaka’s biggest bilateral lender and Zambia has an exceptionally high level of Chinese loan commitments. Zambia’s debt to Chinese public and private lenders is $6.6 billion, almost double the amount disclosed by the previous Zambian government, the China Africa Research Initiative (CARI) has estimated from an analysis of loan data. It does not include penalties or interest arrears that continue to build up. According to the China Africa Research Initiative, copper-rich Zambia has used Chinese loans for more than 69 projects over the period 2000-2018, mostly in the transport and power sectors.
International creditors have complained that the lack of detail on Zambia’s China loans which carry specific non-disclosure terms has hindered the process of restructuring Zambia’s debts. Zambia, a country where 60 per cent of the population don’t have access to electricity, 77 per cent don’t have access to clean drinking water, 46 per cent don’t have access to the internet and where road infrastructure would have to improve by 234 per cent just to reach China levels.
Lack of transparency over the nature of the terms agreed by African government has led to intense domestic criticism and international accusations that China is seeking control over strategic assets. In fact, Zamia been “lured” into borrowing too much from China, falling into a debt trap.
China’s involvement in African debt has varied considerably between countries and over time. Although in recent years this involvement has been framed in the context of the Belt and Road Initiative (BRI), it has for the most part been uncoordinated and unplanned, with credit being offered by competing lenders with links to different elements of the Chinese state. China has cancelled Zambian debt multiple times before, to the tune of $259 million over the period 2000-2018 while Zambia received a total $2 billion in debt relief over the same period from others,
Debt trap diplomacy is a deceptive method adopted by China under the BRI scheme wherein the Chinese first lend huge monies under opaque loan terms to unsuspecting developing nations in the garb of development only to strategically leverage the recipient country’s indebtedness for its own economic, military, or political ends or to seize its assets as a means of repayment.
For example, China had given a loan to develop a strategic port in Djibouti. In 2017, Djibouti’s debt was projected staggering at 88 per cent of its GDP, with China responsible for the bulk of this debt. Djibouti had fallen victim to China’s debt-trap and let China built its first overseas military base there. In September 2018, Zambia lost Kenneth Kaunda International Airport to China over debt repayment in similar circumstances.
China’s ‘donation diplomacy’ and the growing economic dominance in the continent has not gone down well with most African nations, leading to a more intense anti-China sentiment. The locals have raised concerns over rising discrimination by the Chinese, abuse of labour laws and their regular interference in the internal political and economic matters. In 2020, three Chinese nationals were murdered in Zambia’s capital Lusaka is testimony to the growing anti-China feelings.