China and African Debt - A short thread
Continuing a 30-year tradition, the Chinese Foreign Minister began his year with a trip to Africa. There is no better indication of the importance China attaches to its relationship with the continent. 1/
Continuing a 30-year tradition, the Chinese Foreign Minister began his year with a trip to Africa. There is no better indication of the importance China attaches to its relationship with the continent. 1/
Which is why it is so disappointing that very little of note was achieved. Up to now, Africa has suffered more from the economic fallout of the pandemic. Debt servicing and a liquidity crunch has backed us against the wall and one would have expected this to be addressed. /2
China’s role in Africa’s current debt crisis is limited to a few countries – but those few countries have such an outsized role in their sub-regions that any default event there could end up having a domino effect elsewhere in Africa. 3/
So, over the same period that China has deepened its economic relationship with Africa – many African countries gained access to international markets. We went from one country with a sovereign rating in 1994 to 21 in 2020. 4/
With limited development finance, many countries were constrained to borrow from bilateral sources (China mainly) and private sources (domestic capital markets and bondholders). One would expect that bilateral lenders would have more wiggle room in a debt crisis. 5/
In fact, many African countries’ ability to take on Chinese and private debt was made possibility by MDRI/HIPC. It was the debt waivers and the contingent reforms in public financial management that allowed a country like Zambia the fiscal space to take on more debt. 6/
My point – someone took a haircut for the space China has since occupied with its lending in Africa. One cannot ignore China’s role in the back and forth that led to Zambia’s default and increased the pressure on other African sovereigns. We now turn our attention to Kenya. 7/
The #ParisClub has granted Kenya relief, lifting pressure off cash flow. We are once again left with China’s response since China is Kenya’s largest bilateral lender and is due almost as much in debt service as Kenya’s bondholders. 8/ reuters.com/article/us-ken…
Kenya’s position in East Africa and on the continent in general carry far reaching implications for a default than Zambia. That the Chinese Foreign Minister spent his Africa trip without meaningfully addressing this is a letdown. 9/
China just released a #whitepaper on international development with extensive mention of cooperation with Africa, Agenda 2063 and the SDGs. None of those goals are possible without access to private capital and continued access to private REQUIRES avoiding default now. 10/
As we embark on our integration project through the #AfCFTA with a weakened fiscal position because of COVID-19 we need our partners to step up where they wield the most influence, for China - that includes debt. END
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