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China cancels all interest in the loan lent to Africa that are in debt distress

Chinese President Xi Jingping promised African countries to cancel all their interest in loans due this year but those loans only take part in a small proportion of its debt problem.

Many African countries are in debt after the coronavirus has accelerated economic recession. Nearly 20 African countries are in debt distress or at high risk of debt distress, according to the International Monetary Fund (IMF).

A new report titled Debt Relief with Chinese Characteristics released by the China Africa Research Initiative (CARI) at the Johns Hopkins University School of Advanced International Studies on Thursday, stating that the amount of loan calculated as zero loans is only less than 5 percent of Chinese loans advanced to Africa. China had canceled interest-free loans counting in US $3.4 billion in debt in Africa between 2000 and 2019. However, China has lent the US $152 billion worth of loan commitments to Africa from 2000 to 2018. It seems that Africa takes the interest-free foreign aid loans for granted as almost debt lent from all countries from China has written off.

When Africa is not able to pay all its debts, they had to do restructuring and refinancing for getting a new loan to pay off an old one. Though Western countries criticize the intention of China behind lending numerous amounts of loans to Africa, CARI did not find China seeking any advantages from those countries in debt distress. No asset seizure and penalties on arrears were found in the 16 restructuring cases. However, the lack of transparency has raised suspicion about the intention of China.

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