The largest government creditor of emerging economies, China, said that it would cancel 23 interest-free loans to 17 African countries and redistribute US$10 billion of IMF reserves to countries on the continent.
According to a post on the ministry’s website, the cancellations were made during a Forum on China-Africa Cooperation meeting last week by Foreign Minister Wang Yi.
It didn’t specify which countries owed the money or the value of the loans, which it claimed would mature at the end of 2021.
According to a report by the Johns Hopkins University School of Advanced International Studies, Beijing has declared numerous rounds of debt forgiveness for interest-free loans to African nations since 2000, eliminating at least US$3.4 billion in debt through 2019.
Zambia received the greatest debt cancellations during that time period, and it was only mature, interest-free foreign aid loans that were terminated.
According to the report, although some of China’s recent credit in Africa has been restructured, the vast majority of it, including concessional loans and commercial loans, have never been thought about for cancellation.
Rising inflation has prompted central banks all across the world, notably the US Federal Reserve, to raise interest rates, which raises the cost of repaying sovereign loans. A quarter-trillion-dollar mountain of distressed debt accumulated by poor countries, meanwhile, threatens to trigger a historic cascade of defaults by economies that were already in trouble before to the COVID-19 outbreak.
According to the World Bank, Beijing, which has faced criticism for its lending policies toward less developed countries, is responsible for about 40% of the bilateral and private creditor debt that the world’s poorest states must pay this year.
Through its involvement in the Group of 20’s suspension of repayments during the epidemic, it has contributed to recent debt reduction accords.
The declaration made last week underlines China’s initiatives, particularly its Belt and Road Initiative, to forge relationships with poorer countries.
Beijing’s declaration comes at a time when relations between the US and China are at an all-time low. Tensions have been increasing since US House Speaker Nancy Pelosi visited Taiwan earlier this month, and Beijing has been supporting Russia during its invasion of Ukraine.
“What Africa wishes for is a favorable and amicable cooperation environment, not the zero-sum Cold War mentality,” Wang said, according to the post.
IMF chief Kristalina Georgieva has encouraged richer nations to do more by lending their reserves to poorer ones in order to supplement the record US$650 billion resource infusion the organization made last year to help its members weather the consequences of the pandemic.
Through the IMF’s recent injection of special drawing rights, which function like an overdraft and come with no terms, China received the equivalent of around US$38.2 billion.
Wang stated that China is willing to transfer SDRs worth US$10 billion through two of the trusts established by the fund to aid low- and middle-income countries.
The US$10 billion in loan facilities promised to African financial institutions have been delivered by Beijing since the Forum on China-Africa Cooperation was held in Senegal in November 2021, according to Wang.
Additionally, he added, China has granted tariff-free entrance to 98% of exports from 12 African nations this year and has given Djibouti, Ethiopia, Somalia, and Eritrea critical food assistance.
