China To Waive Matured 23 Interest-Free Loans For 17 African Nations

Over the years, China has established itself as Africa’s largest bilateral lender whereby the country helps to bankroll key infrastructure projects on the continent as well as giving out loans.

Just recently, the Chinese government has planned to waive 23 matured interest-free loans for 17 African countries, as well as provide food assistance to struggling nations in the region.

China has also promised to redirect $10 billion of its International Monetary Fund reserves to these nations on the continent. This statement was made by the state councilor Wang Yi at the coordinator’s meeting on the implementation of the follow-up actions of the Eighth Ministerial Conference of the forum on China-Africa cooperation. (FOCAC).

Here is what the minister said;

“China will waive the 23 interest-free loans for 17 African countries that had matured by the end of 2021. We will also continue to increase imports from Africa, support the greater development of Africa’s agricultural and manufacturing sectors, and expand cooperation in emerging industries such as the digital economy, and health, green and low-carbon sectors.

“What Africa wishes for is a favorable and amicable cooperation environment, not the zero-sum cold war mentality. So far this year, China has signed an exchange of letters with 12 African countries on zero tariffs for 98% of their export items to China. We have provided emergency food assistance to Djibouti, Ethiopia, Somalia, and Eritrea. More African agricultural produce has reached the Chinese market through the green lanes”.

Although the 17 African countries were not disclosed by the minister, however, checks show that South Africa, Angola, The Democratic Republic of Congo, Uganda, Kenya, and Djibouti are among African countries with high debt exposures to China.

As of 2020, the African nations with the highest external debt to China as a percentage of gross national income are Djibouti (43%), Angola (41%), and The Democratic Republic of Congo (29%). Kenya, South Africa, and Uganda have been disclosed as the numerous African states that have borrowed heavily from China.

It is interesting to note that since the year 2000, Beijing has announced multiple rounds of debt forgiveness of interest-free loans to African countries, canceling at least $3.4 billion of debt through 2019. The canceled debt was limited to mature, interest-free foreign aid loans, with Zambia receiving the most cancellations over the period.

Beijing’s lending practices to poorer nations, most especially countries in the African region, account for almost 40% of the bilateral and private credit or debt that the world’s poorest countries need to service this year.

With its continuous lending, Chinese banks now make up about one-fifth of all lending to Africa, concentrated in a few strategic and resource-rich African countries. However, China’s lending to African nations have over the years come under severe criticism, as experts and analysts describe such lending as debt traps.

They disclosed that China is deliberately investing in African countries to gain control over key assets, which they described as debt-trap diplomacy. This implies that Chinese loans are collateralized by strategically important assets, from mineral resources to port projects, as the debts are used to deliberately leverage or extract strategic advantages from poor indebted countries including asset seizures when they are unable to meet debt obligations.

In March 2022, Bloomberg reported that despite claims that China was making countries in Africa uncomfortable with its large infrastructure projects and lendings, a deeper look into the evidence showed that the accusations towards China on doing debt-trap diplomacy in the continent, was “unfounded”.