China, Africa’s largest bilateral lender, has announced that it has forgiven debt owed by 17 African countries for 23 interest-free loans due in 2021. According to a post on the website of China’s Foreign Ministry, Foreign Minister Wang Yi announced the debt cancellations during a meeting last week at the Forum on China-Africa Cooperation.
According to sources, China eliminated debt for $113.8 million in interest-free loans slated for maturity in 2020 for 15 African countries including Botswana, Burundi, Rwanda, Cameroon, the Democratic Republic of the Congo, and Mozambique. While it did not specify the value of the loans, which it stated will mature at the end of 2021, it did disclose which countries owed the money.
China has positioned itself as Africa’s top bilateral lender, bankrolling significant infrastructure projects and making loans to the region ranging from the Foundiougne Bridge, which opened this year in Senegal, and the Nairobi Expressway in Kenya, to emergency food aid to Djibouti, Ethiopia, Somalia, and Eritrea.
The Asian superpower will also shift $10 billion of its IMF funds to unspecified African nations (FOCAC). At that summit, China cut its pledge to Africa by 33%, indicating concern about Africa’s debt to it and against the backdrop of declining Chinese economic growth.
According to the China Africa Research Initiative’s (CARI) database, Chinese financiers and African governments signed over 1,180 loan agreements totaling $160 billion between 2000 and 2020, with two-thirds going to transportation, power, and mining projects.
What you should know
According to a report published by the Johns Hopkins University School of Advanced International Studies, Beijing has declared repeated rounds of debt forgiveness of interest-free loans to African countries since 2000, cancelling at least $3.4 billion in debt through 2019.
The debt cancellations were restricted to mature, interest-free foreign aid loans, with Zambia obtaining the highest cancellations during that time period. In dollar terms, Angola, Zambia, Ethiopia, Kenya, and Cameroon have borrowed the most from China. According to the research, the great majority of China’s recent credit in Africa, such as concessional loans and commercial loans, has never been considered for cancellation, though some of it has been reworked.
Inflationary pressures have prompted a wave of interest-rate hikes by central banks around the world, including the US Federal Reserve, raising the cost of sovereign loan repayments.