Africa's Debt Burden

 

Banks and traders have been ‘let off the hook’ by G7 despite being more to blame for the looming debt crisis in Africa than China. African governments owe three times more debt to western banks, asset managers and oil traders than they do to China, and are charged double the interest. China has been “mistakenly” blamed by western leaders for the failure to make progress on debt restructuring.

Western governments should “compel” private lenders to ease loan repayments from low-income countries to tackle a debt crisis, according to campaigners, Debt Justice, formerly the Jubilee Debt Campaign.

12% of African governments external debts is owed to Chinese lenders compared to 35% owed to Western lenders.

Some of China’s loans, mostly focused on infrastructure, have been criticised for their harsh terms and conditions. In the case of a loan to upgrade Entebbe airport, the Ugandan government will have to give China the first 20 years of revenue to repay the debt.

Half of the 22 African countries with the highest debt owe more than 30% to private lenders, while only six owe the same levels to China.

Western governments have failed to take on companies in their own countries who, unlike China, did not suspend debt repayments during the pandemic. 

Tim Jones, head of policy at Debt Justice, explained, “Western leaders blame China for debt crises in Africa, but this is a distraction. The truth is their own banks, asset managers and oil traders are far more responsible, but  the G7 are letting them off the hook.”

The pandemic pushed the foreign debt of low-income countries to the highest levels in 50 years, with almost two-thirds of countries suffering or at risk of debt distress, such as defaulting on a loan, according to the World Bank. Russia’s invasion of Ukraine has caused further concern by disrupting food and commodity prices. The UN said that developing countries struggling with the global cost of living crisis are also lumbered with high debt, depleted foreign reserves and increased interest rates.

Yungong Theophilus Jong, from the African Forum and Network on Debt and Development, said western governments should make private lenders cancel their debts. “Multilateral and private creditors remain the biggest creditors to African governments. Loans from China have increased Africa’s indebtedness, but by far less than western lenders. All lenders must participate in debt relief.”

West must force private lenders to ease Africa’s crippling debt, say campaigners | Global development | The Guardian