The recent announcement that China will cancel the interest-free debts of African countries originally due to mature by the end of 2020 is a huge relief to the continent. Chinese President, Xi Jinping, who made the disclosure at the Extraordinary China-Africa Summit on June 17, said the relief would be extended to the debt owed by “relevant” African nations within the Forum on China-Africa Cooperation (FOCAC) framework. According to him, the move is part of Beijing’s efforts to relieve coronavirus-striken countries of financial distress.
Xi reiterated that the Chinese government would work with members of the G20 to help Africa overcome the global crisis. He also stressed that the G20 should consider extending debt service suspension to hard-hit countries in other parts of the world as well.
The move by China came on the heels of the resolution by the International Monetary Fund and the World Bank for a moratorium on debt repayments of 77 developing countries. About 40 of these countries are located in the Sub-Saharan Africa. Besides, many African leaders had petitioned Beijing for debt write-offs due to the financial devastation caused by the pandemic.
The World Bank has predicted that Sub-Saharan Africa will fall into its first recession in 25 years as a result of the covid-19 outbreak. A report of the International Monetary Fund (IMF) projected Africa’s economic growth to contract by 1.6 % this year amid tighter financial conditions, sharp decline in key export prices and severe disruptions in economic activities linked to the pandemic.
China happens to be Africa’s biggest lender with debts worth more than $150billion between 2000 and 2018. As of 2018, an estimated 20 % of all African governments’ debts is owed to China. Due to the magnitude of these debts, China is playing a special role for the debt relief campaign for Africa.
Aside other financial and institutional challenges, the covid-19 outbreak has made it very difficult for African countries to pay back, given the impact of the pandemic on economic activities on the continent. We commend and urge the Chinese authorities to walk the talk in the debt relief.
We welcome the move to cancel Africa’s debts considering that some of the debts are controversial and are already bad debts. It makes sense to cancel them. African leaders should not however see the gesture from China as perpetual. Going forward, whatever financial obligation or debts entered into should be honored by respective countries. Any borrowing from any source or institutions should be tied to specific projects with capacity to pay back in due course. Africa should not expect debt forgiveness as a matter of right.
The Sun, July 4 2020
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