Beijing to waive some Africa loans, offer billions in IMF reserves

BEIJING • China, the largest government creditor to emerging economies, has said it will forgive 23 interest-free loans to 17 African countries and redirect US$10 billion (S$13.8 billion) of its International Monetary Fund (IMF) reserves to nations on the continent.

Foreign Minister Wang Yi announced the cancellations in a meeting last week of the Forum on China-Africa Cooperation, according to a post on the ministry's website.

It did not provide details on the value of the loans, which it said matured at the end of last year, nor did it say which nations owed the money.

Since 2000, Beijing has announced multiple rounds of debt forgiveness of interest-free loans to African countries, cancelling at least US$3.4 billion of debt through 2019, according to a study published by Johns Hopkins University School of Advanced International Studies.

The cancelled debt was limited to mature, interest-free foreign aid loans, with Zambia receiving the most cancellations over that period. But the vast majority of China's recent lending in Africa, such as concessional loans and commercial loans, had never been considered for cancellation, the report added, although some of it has been restructured.

Surging inflation has triggered a wave of interest-rate increases by central banks worldwide, including the US Federal Reserve, which drives up the costs of sovereign loan repayments.

Meanwhile, developing nations have amassed a quarter-trillion dollar pile of distressed debt that threatens to create a historic cascade of defaults by economies that were struggling even before the Covid-19 pandemic.

Beijing, which has come under criticism for its lending practices to poorer nations, accounts for almost 40 per cent of the bilateral and private-creditor debt that the world's poorest countries need to service this year, according to the World Bank.

It has helped forge recent debt-relief agreements, participating in the Group of 20 suspension of repayments during the pandemic.

The announcement last week highlights China's efforts to build ties with developing nations, particularly through its Belt and Road Initiative.

The US and China are competing for influence around the world, and Beijing's announcement comes at a low point in ties between the two superpowers, with tensions rising after a visit to Taiwan by US House Speaker Nancy Pelosi earlier this month and Beijing's support of Russia amid its invasion of Ukraine.

China this year also agreed to tariff-free entry to 98 per cent of exports from 12 African countries.

BLOOMBERG