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I hope Tanzania and Zambia read the fine pints on the loan/inversement agreement.
I hope you read the fine print of your article
Along with the usual mix of government mismanagement and corruption are two unexpected and devastating events: the war in Ukraine, which has sent prices of grain and oil soaring, and the U.S. Federal Reserve’s decision to raise interest rates 10 times in a row, the latest this month. That has made variable rate loans to countries suddenly much more expensive.
The Chinese Ministry of Foreign Affairs, in a statement to the AP, disputed the notion that China is an unforgiving lender and echoed previous statements putting the blame on the Federal Reserve. It said that if it is to accede to IMF and World Bank demands to forgive a portion of its loans, so should those multilateral lenders, which it views as U.S. proxies
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China argues it has offered relief in the form of extended loan maturities and emergency loans, and as the biggest contributor to a program to temporarily suspend interest payments during the coronavirus pandemic. It also says it has forgiven 23 no-interest loans to African countries, though AidData’s Parks said such loans are mostly from two decades ago and amount to less than 5% of the total it has lent.
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In high-level talks in Washington last month, China was considering dropping its demand that the IMF and World Bank forgive loans if the two lenders would make commitments to offer grants and other help to troubled countries, according to various news reports.
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On this point, experts who have studied the issue in detail have sided with Beijing. Chinese lending has come from dozens of banks on the mainland and is far too haphazard and sloppy to be coordinated from the top.
Some poor countries struggling to repay China now find themselves stuck in a kind of loan limbo: China won’t budge in taking losses, and the IMF won’t offer low-interest loans if the money is just going to pay interest on Chinese debt.
Basically Bejing is asked to swallow the debt when Washington increases interest rates. Its also a lot more unreasonable when private and multilateral debts is a much larger part of Africa’s debt pie than bilateral debt with China is
What your Trump-supporting journalist says –
Behind the scenes is China’s reluctance to forgive debt…
In the past under such circumstances, big government lenders such as the U.S., Japan and France would work out deals to forgive some debt, with each lender disclosing clearly what they were owed and on what terms so no one would feel cheated. But China didn’t play by those rules.
The actual facts –
The 2022 bloomberg article you cite first state:
It didn’t provide details on the value of the loans which it said matured at the end of 2021, nor did it state which nations owed the money.
I couldn’t read much further due to the paywal.
The Bloomberg article has too few details to make conclusions. We don’t know if AP and Bloomberg articles are referring to the same countries, nor whether it’s a significant portion or that country’s debt toward China.
The Reuters 2021 article has more details, and cite write-offs, as well as specific countries benefiting from deferrals: Angola, Pakistan, Kenya, the Republic of Congo. It’s good to read there’s some willingness to accomodate some countries.
Sadly that didn’t prevent Zambia and Sri Lanka from defaulting. China has lended hundred of billion of dollars with unsustainable terms, and this contributed to countries defaulting. That’s a bad situation for everyone involved.
Thanks for the links, it’s interesting background. In that article from February 2021, The Artlantic states “There was also never a default”.
There was indeed no default as of February 2021. The default occured later, in April-May 2022, so we can’t expect a past article to include that information.
All major lenders need to take part in restructuring the debt indeed. That occured in 2023, and multiple lenders asked for a restructuring deal similar to the first one signed with China. I don’t know about the US, but Japan/India/French lender were looking for a similar restructuration terms. That sounds fair to me.
The country’s default is clear evidence the overall debt wasn’t sustainable. Both Sri Lanka and its lenders have a responsibility on this. China is often the first mentioned because it was (still is?) Sri Lanka’s biggest foreign lender, although it would be good to have transparency of the country’s debt and interest rates on a per-lender basis, to see which ones are the most sustaonables.
Good luck.
So what is China trying to extract from Zambia and Tanzania?
If it’s similar to most of the other BRI projects, Tanzania and Zambia get railways, Chinese workers get jobs, more expertise in the field, and China gets access to healthier/wealthier markets in the two countries.
Money. From people buying Chinese stuff. >80 million people live in those countries and they would like very much if they started buying lots of cars and electronics
