BEIJING, China
China, the largest government
creditor to emerging economies, said it will forgive 23 interest-free loans to
17 African countries and redirect $10 billion of its International Monetary
Fund reserves to nations on the continent.Courtesy
Foreign Minister Wang Yi
announced the cancelations in a meeting last week of the Forum on China-Africa
Cooperation, according to a post on the ministry’s website. It didn’t provide
details on the value of the loans which it said matured at the end of 2021, nor
did it state which nations owed the money.
Since 2000, Beijing has announced
multiple rounds of debt forgiveness of interest-free loans to African
countries, cancelling at least $3.4 billion of debt through 2019, according to
a study published by Johns Hopkins University School of Advanced International
Studies. The cancelled debt was limited to mature, interest-free foreign aid
loans, with Zambia receiving the most cancellations over that period.
However, the vast majority of
China’s recent lending in Africa such as concessional loans and commercial
loans have never been considered for cancellation, the report added, though
some of it has been restructured.
Surging inflation has
triggered a wave of interest-rate increases by central banks worldwide,
including the US Federal Reserve, which drives up the costs of sovereign loan repayments.
Meanwhile, developing nations have amassed a quarter-trillion dollar pile of
distressed debt that threatens to create a historic cascade of defaults by
economies that were struggling even before the COVID-19 pandemic.
Beijing, which has come under
criticism for its lending practices to poorer nations, accounts for almost 40
percent of the bilateral and private-creditor debt that the world’s poorest
countries need to service this year, according to the World Bank. It has helped
forge recent debt-relief agreements, participating in the Group of 20
suspension of repayments during the pandemic.
The announcement last week
highlights China’s efforts to build ties with developing nations, particularly
through its Belt and Road Initiative. The US and China are competing for
influence around the world, and Beijing’s announcement comes at a low point in
ties between the two superpowers, with tensions rising following a visit to
Taiwan by US House Speaker Nancy Pelosi earlier this month and Beijing’s
support of Russia amid its invasion of Ukraine.
“What Africa wishes for is a
favourable and amicable cooperation environment, not the zero-sum Cold War
mentality,” Wang said, according to the post.
The IMF’s record $650 billion
resource injection last year was intended to help its members weather the
effects of the outbreak, but fund chief Kristalina Georgieva has urged richer
nations to do more by lending their reserves to poorer ones.
China received the equivalent
of about $38.2 billion through the IMF’s recent injection of special drawing
rights, which work like an overdraft and come with no conditions. Wang said
that China is willing to channel $10 billion worth of China’s SDRs through two
of the fund’s trusts set up to help poor and middle-income nations.
Since the Forum on
China-Africa Cooperation took place in Senegal in November 2021, Beijing has
delivered $3 billion of $10 billion of credit facilities pledged to African
financial institutions, Wang said in the speech. In addition, this year China
has agreed to tariff-free entry to 98 percent of exports from 12 African
countries and has provided emergency food assistance to Djibouti, Ethiopia,
Somalia, and Eritrea, he said. - Bloomberg
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