By Emmanuel Yashim
Debt is part of human life and existence. Debt is as old as mankind, and so are arrears.
According to the International Monetary Fund (IMF) database, there is only one country in the world that is debt-free. This country is the Macao SAR in Greater China.
Seven of the world’s major economies are among the 20 countries with the highest external debt. These are the United States ($28.9 trillion), Russia ($280.1 billion), Great Britain (2 trillion pounds), France (3 trillion dollars), Germany (5.9 trillion euros), Japan (12.2 trillion dollars) and China (7 trillion dollars).
African countries are not left out. Many of them are accumulating loans from the World Bank, IMF, China and other countries around the world to fund various development projects, but this trend has analysts of great concern.
Worries among analysts are fueled by mounting debt in many of the continent’s countries.
According to the Economic Times, Africa’s debt to China exceeded $140 billion in September 2021.
Meanwhile, the IMF estimates that African countries would need up to $285 billion in additional financing from 2021 to 2025 to ramp up their spending response to the coronavirus pandemic.
Over the past two decades, China has emerged as a major global lender, with outstanding receivables now exceeding 5 percent of global gross domestic product (GDP).
In total, the Chinese state and its affiliates have lent about $1.5 trillion in direct loans and trade credits to more than 150 countries around the world.
This has made China the world’s largest official creditor – surpassing traditional official lenders such as the World Bank, the International Monetary Fund (IMF) or any Organization for Economic Co-operation and Development (OECD) creditor governments combined.
According to the IMF, between September and December 2021, more than 20 low-income African countries are in or at risk of a debt crisis.
The debt of low- and middle-income countries in sub-Saharan Africa soared to a record $702 billion in 2020, according to a new World Bank report released on October 11, 2021. This is the region’s highest level of debt in a decade.
In 2010, Sub-Saharan Africa’s debt was around $305 billion.
China is currently a leading bilateral lender to 32 African countries and the top lender across the continent.
The African countries with the largest Chinese debt in 2020 were Angola ($25 billion), Ethiopia ($13.5 billion), Zambia ($7.4 billion), the Republic of the Congo ($7.3 billion) and Sudan ($6.4 billion). .
But the debt has triggered a repayment crisis. China owns around 72 percent of Kenya‘s foreign debt, which totals $50 billion.
According to sources, Kenya alone is to pay 60 billion dollars to the China Exim Bank in the next few years.
Accordingly, the port of Mombasa could be lost if Kenya defaults on the repayment of the loan to Kenya’s own Comptroller General.
National Treasury Cabinet Secretary Ukur Yatani denied that Kenya had offered the strategic national asset as collateral for the $3.2 billion loan provided by the Export-Import Bank of China (Exim China) to fund its project Standard Gauge Railway (SGR) was sourced.
The Ugandan government was also forced to postpone construction of the ‘Kampala-Entebbe Expressway after political opposition raised concerns about the country’s rising debt profile.
China has reportedly committed nearly $1.4 billion to Djibouti, equivalent to 75 percent of the country’s GDP.
Between 2010 and 2015, Nigeria’s debt to China grew 136 percent from $1.4 billion to $3.3 billion, and the country had to issue $195 million in debt repayments to China in 2020.
Meanwhile, rating agency Agusto&Co said in its January 2022 Economic Newsletter that Nigeria’s external debt could rise from about N15 trillion to N18 trillion if the Central Bank of Nigeria (CBN) devalues the naira by about 20 percent.
The company added that Nigeria has been on a restrictive monetary policy stance since 2015 and has increased it since 2020 to date.
Again, Nigeria has to repay $400 million for a loan made by China for the Nigerian National Information and Communications Technology Infrastructure Phase – II Project signed in 2018.
Former chairman of the Senate Foreign and Local Credit Committee, Senator Shehu Sani, said credit is in the economic development of the 21st century, but “we should only borrow when it is necessary.
“It’s impossible to say that you want to develop your country without borrowing, but as a developing country, borrowing must be a priority,” he said.
Meanwhile, DMO Director General Ms. Patience Oniha has reviewed the IMF report and a similar report by leading pan-African credit rating agency Agusto & Co.
She said both reports failed to take into account the challenges Nigeria has been facing lately.
“There have been challenges like two recessions, a sharp drop in sales and security issues.
“Furthermore, the analyzes fail to recognize the infrastructure improvements achieved through borrowing and the government’s strong revenue-boosting measures,” she said.
The DMO clarified that Nigeria’s loans from China accounted for $3.59 billion (or 9.4 percent) of the country’s total external debt.
It also clarified that the loans were mostly granted on concessional terms as no national asset was flagged as collateral.
“Before any foreign loan is finalized, including the issuance of Eurobonds, they are approved by the Federal Executive and then by the National Assembly.
Meanwhile, China’s Foreign Minister Wang Yi has dismissed allegations that Beijing has lured African countries into debt traps by offering them massive loans, dismissing the idea as a “narrative” pushed by opponents the fight against poverty.
Wang, speaking ahead of a tour of Beijing-funded projects in Kenya in January, said China’s sizeable lending to Africa was “mutually beneficial” and not a strategy to force diplomatic and commercial concessions.
“It’s just not a fact. It’s speculation played by some with ulterior motives,” he told reporters in the Kenyan port city of Mombasa.
Available records show that at least 18 African countries have renegotiated their debts, while 12 others are in talks with China to limit approximately $28 billion in loans.