African countries face mounting debts. But where is it coming from?
Africa is facing a looming debt crisis, say leading development economists.
“Almost 40% of sub-Saharan African countries are in danger of slipping into a major debt crisis” according to the Overseas Development Institute, ahead of a major conference on debt being held in London this week.
And the relationship between African nations and China is often seen as a significant part of the problem.
Its critics say that major infrastructure projects carried out by Chinese companies in Africa are too expensive, and burden the host countries with enormous debts they can’t hope to repay.
The Chinese government is adamant that its economic relationships with African countries are mutually beneficial and rejects suggestions that it is using debt to expand global influence.
So is China really responsible for Africa’s growing debt burden? Africa’s debt burden
The International Monetary Fund (IMF) has recently warned that Africa is heading towards a new debt crisis, with the number of countries at high risk doubling over the past five years.
The World Bank now classifies 18 countries as at high risk of debt distress, where debt-to-GDP ratios surpass 50%.
The total amount of external debt for the continent is estimated at $417 billion.
Around 20% of African government external debt is owed to China, says the Jubilee Debt Campaign, a charity which campaigns for the cancellation of poor countries’ debt.
This makes China the largest single creditor nation, with combined state and commercial loans estimated to have been $132 billion between 2006 and 2017.
A further 35% of African debt is held by multilateral institutions such as the World Bank, with 32% owed to private lenders.
There’s one important caveat: this data is hard to verify. “China is not a member of the OECD (Organisation for Economic Cooperation and Development) and they do not participate in the OECD’s Creditor Reporting System,” said Christina Wolf, an economics expert at Kingston University.
