China cuts down investment pledges for Africa amid mounting debt fears
May 09, 2022
Beijing [China], May 9 : While infrastructure projects are one of the main priority areas in China-Africa cooperation, Beijing has cut down on its investment pledges for the continent for the first time in December 2021, according to reports.
President Xi Jinping, who committed USD 40 billion to Africa, a 33.3 per cent drop from the USD 60 billion in the last two FOCAC summits, did not mention the word infrastructure even once during his speech at Forum on China-Africa Cooperation (FOCAC) meeting last year, European Times reported.
Similarly with Kenya, this is the second year in a row that China trailed behind Japan in bilateral loans to Nairobi. Japan has become the largest bilateral lender for Kenya for the financial year 2022-23 after China considerably reduced its development projects in the country.
According to reports, Beijing is projected to lend Kenya USD 255 million for the fiscal year 2022-23, a sharp cutback from USD 1.2 billion in 2015-16.
However, most the Chinese lending has now been curtailed due to the increasing debt fears especially in the post-COVID-19 era, a byproduct of the Chinese "Debt Trap" policy. Chinese lenders have grown more cautious as some nations have reached the limit of their borrowing capacity and the prospect of default looms large.
The International Monetary Fund (IMF) persistently warns African and other third-world countries that mounting debts to China are dangerous. It stresses that Chinese creditors create some instability or vulnerabilities.
China focuses on financing impoverished, low-income, or economically troubled nations. As of 2020, it owed roughly USD 170 billion to low-and middle-income countries. This loan is heavily tied to the BRI and Infrastructural projects, including roadways, trains, ports and airports, mining and energy. According to AidData, over 40 economically fragile nations have "hidden debt" to Chinese lenders totalling over 10 per cent of their GDP. Some countries, including Laos, Zambia, and Kyrgyzstan, owe China more than 20 percent of their GDP.
