Last month, Beijing waived 23 interest-free loans to African countries which matured in 2021, while keeping the total value unpublished. However, according to the newest study from Boston University released on Monday, September 12th, the waived loans were worth about $600 million.
According to Reuters, a Boston University Global Development Policy Center database shows that Chinese state-run lenders pledged a total of 53.8 billion dollars in loans to the world’s poorest countries between 2000 and 2012.
Hence the waived amount only accounted for a tiny proportion of around 1.1%.
The center stated, “The provision and forgiveness of (interest-free loans) are important diplomatic and symbolic tools in China’s lending policy.” The loans “are more like foreign policy tools than bottom-line thinking based financial considerations.”
According to African liberty, the continent’s average debt-to-GDP ratios exceeded 50% before the pandemic. The most recent Africa Economic Outlook from the African Development Bank expects Africa’s debt-to-GDP ratio to be 70% this year. As of February 2022, 23 African countries were either in debt distress or at risk. Hence the debt forgiveness from Africa’s largest bilateral creditor was welcomed and somewhat expected.
Bloomberg reported another study published by Johns Hopkins University School of Advanced International Studies. Since 2000, 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.
China has provided record amounts of financing to developing countries over the past two decades to promote the Belt and Road Initiative. However, people criticized Beijing’s lending practices for leaving the poorer countries struggling to repay debts and therefore vulnerable to pressure from its creditor.