US to push for transparency on Chinese loans to African nations
The US plans to push for more transparency around the terms of debts that African nations owe to China as they struggle to make repayments, a senior government official said.
Washington will also “try and figure out how these countries can get out of a crushing debt that oppresses their people,” said Jose Fernandez, the under secretary for economic growth, energy, and the environment at the State Department.
Fernandez made the comments in an interview on the sidelines of the US-Africa Leaders Summit in Washington, attended by more than 40 heads of state as President Joe Biden seeks to revitalize the US relationship with the continent, where China has made influential inroads through billions of dollars of investment.
The Chinese Embassy in Washington didn’t respond to an emailed request for comment.
Many nations on the continent turned to China — now the world’s biggest creditor to developing countries — for loans to build airports, hospitals, housing and roads. While the funding has helped construct key infrastructure in some African countries, many are also struggling to repay as the projects are not fully commercialized.
The question of confidentiality of Chinese debt became an issue during pandemic-era talks to provide emerging nations with relief as there was concern that not all lending by Chinese banks was public and they could get a better deal in any restructuring.
China has come under criticism for its perceived lack of engagement in a global effort to reduce debt burdens for developing nations, with US Treasury Secretary Janet Yellen saying on multiple occasions that Beijing has become the biggest obstacle to progress.
Since 2000, however, Beijing has announced multiple rounds of debt forgiveness of interest-free loans to African countries, canceling at least $3.4 billion of debt through 2019, according to a study published by Johns Hopkins University School of Advanced International Studies.
And in August, China 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.
Low-income nations — most of which are facing record-high debt levels — also lack robust data on debt. A 2021 World Bank report found that almost 40% of these countries have never published debt data on their websites or hadn’t updated their data over the preceding two years. Differences in definitions and recording errors showed variations equal to as much as 30% of some nations’ gross domestic product, it found.
The Group of 20 nations has set up a so-called Common Framework that brings the Paris Club of traditional rich debtor countries together with China to try to restructure the debts of low-income countries on a case-by-case basis. Only three nations — Chad, Ethiopia and Zambia — signed up, and after almost two years of talks, Chad became the first to find resolution in November.
China inserted clauses in loans signed with some African nations that “exclude or prohibit the publication of the agreement,” Fernandez said. “So people in the country do not know what their country has signed, they do not know how much they borrowed, they do not know at what interest rate.”
Loan renegotiation requires that agreements should be public, people know how much was borrowed, the interest rate, and what the terms are, and the collateral given by those countries, Fernandez said.
“It is a process that benefits countries and allows them to get out of the debt trap,” he said.
