In this short piece, I will use statistical data extracted from the World Bank’s online database. The figures I will use here are for Africa as a whole, i.e. sub-Saharan Africa (the one most often referred to when talking about “African” debt) and North Africa. Figures are for the year 2021. These are averages for the whole continent and do not consider the great diversity of situations. This choice is imposed on me by the propaganda of both sides, for whom nuanced thinking is not a virtue.
In 2021, the debt owed to private creditors (not “Western” private creditors) is equal to
1. If only publicly guaranteed private debts are considered:
- 44.4% of external public and publicly guaranteed debt stocks;
- 34.5% of external long-term debt stocks;
- 27.1% of total debt burden (total external debt stock).
2. If publicly guaranteed and non-guaranteed private debts are considered
- 56.3% of external long-term debt stocks;
- 44.1% of total debt burden (total external debt stock).
As shown, the weight of “private debt” can therefore vary between 27.1% and 44.4% depending on the calculation. Not specifying the scope of the private debt and, moreover, not giving a definition of the “total debt burden” allows one to say anything and mostly anything at all.
Are these Western private debts? How does the World Bank define “private creditors”? In addition to “manufacturers, exporters and other suppliers of goods” (China being a leader in these three categories throughout Africa), “private creditors” also include private banks within which China ranks centrally supervised Chinese state-owned banks, but also bondholders thus including Chinese institutional and individual speculators. So, “private creditors” does not mean, nor should it be equated with “Western private creditors”.
At this stage, let’s hear the World Bank’s statistics on China’s role. The table below shows us:
- 10.1% of long-term external debt is owed to Chinese creditors (public and private); China ranks first among creditor countries.
- 12.9% of long-term external public and publicly guaranteed debt is owed to Chinese creditors (public and private); China ranks first among creditor countries.
- 7.4% of long-term external publicly guaranteed debt is owed to Chinese creditors (public AND private); China ranks first among creditor countries.
Carmen Reinhart, currently Chief Economist of the World Bank and Senior Vice President, along with two other co-authors, published a study on China’s overseas lending in which they found that 50% of Chinese loans to developing countries were “hidden debt”. Note that this assumption was confirmed by Kathleen Brown in an August 2022 AidData working paper in which, using recently available data, she found that half of Chinese loans to sub-Saharan Africa would not appear on sovereign debt records. In other words, the weight of Chinese lending, whether public or private, to Africa may be much more significant than the World Bank’s statistics show.
The bondholder category is responsible for 68.1% of public and publicly guaranteed debt from bonds that are either publicly issued or placed by the private sector. When an African government issues sovereign bonds on the international capital markets, it must go through a financial intermediary no matter whether the bonds are denominated in local currency, dollars, euros (Eurobonds) or renminbi (Panda Bonds). As a result, the nationality of the final subscribers can hardly be known by African issuers, let alone the World Bank. Accordingly, these debts cannot be described as “Western” on the sole grounds that U.S. banks and investment funds acted as conduits for these African countries – as did Chinese financial institutions for their underwriting of Panda Bonds.
Finally, it should be remembered that one of the effects of globalization is to blur financial borders (I am not referring to banking, tax and judicial havens); for instance, the China Investment Corporation (a state-owned investment fund) has large stakes in major U.S. banks and investment funds that could manage such bonds.
Given the information available, the concept of “Western private creditors” is very poorly documented and its current use is much more a matter of well-orchestrated propaganda than of truly objective thinking.
Thierry Pairault is Emeritus Research Director at France’s National Centre of Scientific Research (CNRS)
