New report reveals African countries are 3 times more indebted to Western firms than to Chinese lenders
A new report by Debt Justice has shown that many African countries owe three times more debts to West banks, oil traders and asset managers than they do to Chinese lenders.
The report also revealed that these Western firms charge African countries double the interest rates, compared to their Chinese counterparts.
The revelations have questioned long-standing narrative/belief that many African countries are more indebted to the Chinese. Recall that this is the same excuse Western leaders have repeatedly used to justify their lack of commitment to restructure debts for African countries.
In the report which was seen by Business Insider Africa, Debt Justice’s Head of Policy, Tim Jones, was quoted to have said:
“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. China took part in the G20’s debt suspension scheme during the pandemic, private lenders did not. There can be no effective debt solution without the involvement of private lenders. The UK and US should introduce legislation to compel private lenders to take part in debt relief.”
Using available World Bank data to calculate the disparities between African countries’ Western and Chinese loan exposures, the report was able to establish the following:
- Only 12% of African countries’ external debts are owed to the Chinese.
- On the other hand, 35% of African countries’ external debts are owed to Western lenders, specifically private firms such as the afore-mentioned.
- These private lenders charge the highest interest rates of 5%, compared to 2.7% interest rate charged by the Chinese and 1.3% interest rate by multilateral lenders such as the IMF and the World Bank.
- Many African countries with the highest public debt burdens actually have very little loan exposures to the Chinese.
- 24 African countries who spend more than 15% of their revenue on debt servicing actually have their “median average of debt payments by creditor grouping” at 11% to the Chinese, compared 32% to Western private lenders.
Debt Justice, which is a global campaign group, said it chose to release the report ahead of the G20 Finance Ministers taking place later this week, as part of efforts urging Western Governments to compel private lenders to partake in the G20’s debt relief scheme “the Common Framework”.
Business Insider Africa understands that no African countries have received any debt relief under the framework, even though some applied.
