‘African Countries Cannot Be Forgiven $152Bn Debts Because Of COVID-19’-China

‘African Countries Cannot Be Forgiven $152Bn Debts Because Of COVID-19’-China

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By Spy Uganda

The People’s Republic of China has rubbished talks of forgiving African countries the debts they owe, just because of the economic hardships posed by the Coronavirus (COVID-19) pandemic.

According to officials in Beijing, the best China can do is to delay demanding payment for the debts, but not forgive or cancel them completely.

China, which is Africa’s largest bilateral creditor, is likely to agree to delay demands but not forgive its $152 billion of loans to Africa, an approach at odds with prior forbearance plans from groups including the Paris Club, according to a top Johns Hopkins University researcher.

“The Chinese have always done their lending on the idea that individual projects contribute to structural transformation and economic development,” said Deborah Brautigam, who heads the China Africa Research Initiative at JHU’s School of Advanced International Studies.

The thinking is, “those projects might be good projects and viable projects to get countries to a new stage where they might be in a position to repay the loans,” she said.

Brautigam’s figures include loans made between 2000 and 2018. While many have been repaid on schedule, it shows just how much China’s lending has grown in Africa amid a push for political and economic clout through an overseas infrastructure investment plan begun by President Xi Jinping in 2013.

China will also provide $2 billion over two years to support the fight against the pandemic, especially in developing countries, Xi said in a speech to the World Health Assembly this week.

The good news is that China is typically willing to negotiate payment extensions. “Usually, it’s not that difficult to lengthen the payment period or lengthen the maturity of loans,” Brautigam said.

China agreed last May to restructure Republic of Congo debt as a prerequisite to a deal with the International Monetary Fund deal. Under the terms, the Asian nation deferred debt payments but refused to accept any reduction in principal.

At the time, Chinese entities accounted for about 34% of Congo’s external debt. China holds more than a quarter of external debt owed by nations that qualify for a temporary Group of 20 debt suspension effort, according to the Institute for International Finance in Washington.

China has backed the G-20 plan, Brautigam said, although it hasn’t participated in previous global debt relief initiatives. All told, according to IIF data, China’s outstanding debt claims reached $5.5 trillion last year.

This comes at a time when Private creditors representing more than $9 trillion of assets under management have already formed a group to negotiate debt relief for several African countries.

In the meantime, Paris Club chair Odile Renaud-Basso said she’s confident that China will take part in global debt negotiation efforts, although it may have to clarify the scope of its loans, especially for African countries.

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