China versus the rest: Africa debt relief offers splits opinion
After 10 years of lending by Chinese government, banks and contractors to Africa, the Asian country is being praised for its co-operation with the rest of the G20 on debt relief. But its failure to include China Development Bank has irked multilateral lenders
African governments saddled by years of debt accumulation, fuelled by bilateral loans from China, are seeing a surprising amount of support from the Asian superpower during the Covid-19 pandemic.
This has triggered debate over China’s approach to tackling debt repayments versus that of the international multilateral development banks.
Some African countries have been brought to their knees in recent years over soaring debt, a large chunk of which has come from China. Between 2007 and 2017, the Chinese government, banks and contractors lent $142bn to Africa’s governments and state-owned enterprises, shows data from Washington DC-based China Africa Research Initiative (CARI).
But governments’ repayment abilities — which have been tested numerous times in the past — faced their biggest challenge this year due to the Covid-19 pandemic. To help tide them over, the G20 kicked off a debt service suspension initiative — which includes China’s involvement — that offers temporary suspension of debt repayments for 77 developing countries, many of which are from Africa, between May and December.
“China working together with the G20 members in this multilateral initiative is unprecedented,” Deborah Brautigam, CARI director told GlobalMarkets.
“China has been working with the G20 countries for a few years now and has earned a reputation as being a constructive player. This is the first crisis since they became part of G20, and they don’t want to drag their heels.”
Waiving not drowning
China is understood to have started discussions with a number of African countries to either extend their loans, renegotiate terms or undertake a debt re-profiling.
China president Xi Jinping has also encouraged Chinese commercial banks that are not part of DSSI to help with debt restructuring in Africa. Discussions with Angola, which has received a third of all Chinese lending to Africa, are in play, as are negotiations with Zambia.
Additionally, China has waived interest-free government loans maturing by the end of the year for some eligible African countries.
Most of China’s lending is through the Export-Import Bank of China, which being a policy bank can be part of the DSSI, while lending from China Development Bank, also a substantial amount, is excluded as it is a commercial bank.
The exclusion of CDB has been a point of contention, with World Bank president David Malpass recently calling for the lender to fully participate in the DSSI, said Brautigam. The World Bank itself has offered no debt relief to African countries but instead offered fresh funding.
That has not gone unnoticed by the Chinese authorities. In April, Chinese minister of finance Kun Liu said that “as the world’s most influential multilateral development agency, major multilateral creditor, and initiator for suspension of debt service payments, [the World Bank] should lead by example in suspending debt service payments from [International Development Association borrowing] countries and proposing a debt suspension timetable and roadmap.”