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It’s China, Not Africa That Could be Facing a Debt Trap: Report

Top 20 recipients of Chinese loans in Africa, 2000–20 ($ millions, unadjusted). Source: Boston University Global Development Policy Center (2022), ‘Chinese Loans to Africa Database.’ Note: These figures are based upon loan commitments, and should not be regarded as equivalent to African government debt, as a portion of signed loans are not disbursed, and a significant portion have been repaid as scheduled.

At 12% of Africa’s total external debt, China didn’t cause the current wave of debt distress hitting the continent. But the crisis presents Beijing with a dilemma: should it strongarm these countries to get its money back or trade economic losses for diplomatic gains?

This is the main argument in an interesting and timely new paper from the UK-based research institution Chatham House. The researchers wrote:

“Far from a sophisticated strategy to expropriate African assets, profligate Chinese lending in its early phases may have created a debt trap for China – deeply entangling it with obdurate and increasingly assertive African partners.”

The paper argues that cooperation between China and traditional Western lenders is the only way out of the impasse. However, they also argue that disagreements between Western governments and its private sector are a significant barrier to progress.

Chatham House Charts Next Steps for Africa’s Debt Distressed Economies:

  • WESTERN LENDERS AND CHINA: The paper recommends greater West-China engagement via the G7 and G20 in three phases: a broad-based dialogue between China, the Paris Club, African stakeholders and international financial institutions, deep coordination between China and Western lenders, and an action plan led by G7 and G20 Finance Tracks to address obstacles to implementing the G20’s Common Framework for debt restructuring.
  • WESTERN PUBLIC AND PRIVATE SECTORS: “Faster and more substantial progress – including agreement on debt restructuring in specific countries – will require solutions to a number of technical disputes between China, Paris Club members and the private sector. These relate to the assessment of debt sustainability, the need for debt transparency, the role of state-owned financial institutions in the provision of debt relief, and the precise form of debt relief.


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