Frontier African states deeply in hock to China and unable to repay their debts to the Asian powerhouse are turning to the IMF in search of advice, financial aid and structural support.
Once a pariah across much of sub-Saharan Africa, the Fund is engaged in talks with the Republic of the Congo in a desperate attempt to manage its eye-watering debts. Government debt as a share of GDP was 119% in 2017, according to IMF data. The country owes creditors including Export-Import Bank of China, while sources at the IMF say mainland corporates owe more than $9bn.
“We are working with them on ways to manage their debt,” one Fund official told GlobalMarkets. “It’s at an unsustainable level.” Congo has held talks with the African Development Bank and the World Bank as it seeks new ways to repay China while keeping its tiny economy from bankruptcy.
None of this is easy. The IMF, insiders say, is struggling to determine exactly how much the tiny state owes to China, in part because it does not know itself. “It’s not like it owes some big amount ‘to Beijing’,” says one insider. “It owes money to many different” Chinese commercial development banks and state-run corporations.
China’s increasingly zealous lending is causing rising concern across a long-troubled continent. It lent $143bn to regional countries between 2000 and the end of 2017, according to Johns Hopkins University-funded China Africa Research Initiative, and in September, president Xi Jinping said China would lend another $60bn in aid and loans to needy nation states.
In September, in an attempt to push back against criticism of what is seen by many as predatory lending, Xi promised to forgive some African debt. But in Angola, a country whose debt to China hit $21.5bn at the end of 2017, or more than half its external debt, is simply doubling down with Beijing, with the African state securing a new $2bn loan from China Development Bank on Wednesday.
RESPONSIBLE LENDER
China’s attitude is causing widespread and rising resentment. “Yes, it is the responsibility of African countries to know their borrowing limits, but China needs to be a responsible lender,” says Mamadou Ndiaye, chairman of the regional council for public saving at the West African Monetary Union in Cote d’Ivoire.
“It’s also up to Beijing to know who they are lending to, and what its limits are. African countries ask China for more money every day, but China needs to learn when to say ‘no’.” China is still not part of the Paris Club, a multilateral framework for official sovereign creditors and it is being urged to join by Bretton Woods institutions, among others.