China will choose 17 African nations for debt forgiveness and will provide $10 billion in IMF funds.

Ibekimi Oriamaja Reports

The largest government creditor of emerging economies, China, has announced that it will cancel 23 interest-free loans to 17 African countries and redistribute $10 billion of its IMF reserves to those countries.

In a meeting of the Forum on China-Africa Cooperation, Foreign Minister Wang Yi announced the cancellations, according to a post on the ministry’s website, which was cited by a Bloomberg report.

China has become Africa’s largest bilateral lender in recent years, providing loans and funding for important infrastructure projects across the continent.

Yi, who spoke at the coordinator’s meeting on the implementation of the follow-up activities of the eighth ministerial summit of the Forum on China-Africa Cooperation, also stated that the Asian great power will channel $10 billion of its IMF to the as-yet-unnamed countries on the continent (FOCAC).

“China will cancel the 23 interest-free loans that were due to maturity by the end of 2021 for 17 African nations.

“We’ll also keep importing more from Africa, help the continent’s industrial and agricultural sectors grow, and deepen our partnerships in fast-growing fields like the digital economy, health, and low-carbon and green industries.

“Africa wants an atmosphere that is conducive to peaceful cooperation, not a cold war mentality where there is only one winner. China and 12 African nations have already exchanged letters establishing zero tariffs for 98% of their exports to China, according to him.

Although it’s unclear if Nigeria will be among the winners, a lookup of the Debt Management Office (DMO) revealed that as of March 31, 2020, the sum of Nigeria’s borrowings from China was $3.121 billion.

According to the report, this sum only accounts for 3.94% of Nigeria’s $79.303 billion (or N28,628.49 billion at a USD/N361 exchange rate) total public debt as of March 31, 2020.

In the same way, the government reported that loans from China made up 11.28 percent of the country’s $27.67 billion external debt stock as external sources of funding.

The Chinese government did not specify which countries owed the money or the amount of the loans, which it claimed matured at the end of last year.

According to a report by the Johns Hopkins University School of Advanced International Studies, Beijing has declared numerous rounds of debt forgiveness of interest-free loans to African nations since 2000, eliminating at least $3.4 billion in debt through 2019.

Zambia received the greatest debt cancellations during that time period, and it was only possible to cancel mature, interest-free loans made with foreign help.

The research also stated that while some of China’s recent credit in Africa has been restructured, the great majority, including commercial loans and loans with concessions, have never been thought about for cancellation.

The cost of repaying sovereign loans has increased due to a wave of interest rate rises by central banks around the world, notably the US Federal Reserve.

A quarter-trillion dollar mountain of distressed debt has been accumulated by poor countries, and it now threatens to trigger a historic cascade of defaults by economies that were already in trouble before to the Covid-19 outbreak.

According to the World Bank, Beijing, which has drawn criticism from the West for its lending policies toward developing countries, is responsible for about 40% of the bilateral and private creditor debt that the world’s poorest states must pay this year.

Through its involvement in the Group of 20’s suspension of repayments during the epidemic, it has contributed to recent debt reduction accords.

According to the newspaper, the declaration underlines China’s initiatives to strengthen ties with poor countries, particularly through its Belt and Road Initiative.

Beijing’s announcement comes at a time when relations between the two superpowers are at an all-time low, with tensions rising as a result of US House Speaker Nancy Pelosi’s visit to Taiwan earlier this month. The United States and China are competing for influence throughout the world.

IMF head Kristalina Georgieva has urged wealthier nations to do more by lending their reserves to poorer ones. Last year, the IMF injected a record $650 billion in resources to help its members weather the effects of the Covid-19 outbreak.

Wang stated that the nation was willing to use two of the trusts established by the fund to assist low- and middle-income countries to channel $10 billion of China’s special drawing rights.

Wang stated in the address that since the FOCAC was held in Senegal in November of last year, Beijing has delivered $3 billion of the $10 billion in credit facilities pledged to African financial institutions.

In addition, China has permitted tariff-free entrance to 98% of exports from 12 African nations this year and has given Djibouti, Ethiopia, Somalia, and Eritrea emergency food assistance, according to Wang.