China 'exports' more debt pills to Africa latched on debt-knife's edge

[...]African leaders are acutely aware that the major cause of their debt-stress are mindless investments of costly borrowed funds into mega glitzy infrastructure projects, which not only suffered bouts of corruption but also failed to create jobs and gin up economic growth! About half of these loan...

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Bibliographic Details
Published inTax India Online
Main Authors Kumar, Shailendra, Founder Editor
Format Trade Publication Article
LanguageEnglish
Published Mumbai Athena Information Solutions Pvt. Ltd 12.09.2024
Subjects
Banking
Cooperation
Debt
Developing countries
Exports
Infrastructure
LDCs
Loans
Pandemics
China
Africa
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Summary:[...]African leaders are acutely aware that the major cause of their debt-stress are mindless investments of costly borrowed funds into mega glitzy infrastructure projects, which not only suffered bouts of corruption but also failed to create jobs and gin up economic growth! About half of these loans, China has sanctioned in the past two decades, have become due but borrowers are financially in deep distress owing to a host of factors like post-pandemic relief measures; Ukraine war perking up commodity prices, rising inflation and subsequent hike in interest rates raising the cost of loans, and eroding value of local currencies against US Dollar coupled with tardy growth. More than 25 African countries are already saddled with excess debt and are at high risk of defaulting, as per the African Development Bank. Since China's own banking sector has run into quicksand with off-balance sheet exposures, it has turned extra cautious to fund new projects, and a major chunk of its loans in the recent past has been only emergency rescue loan to help them stay afloat and repay their debts. Against China's records, the cautious World Bank doled out only USD 72 billion in international development financing commitment in 2021.