China cancels 23 interest-free loans to 17 African countries

By Eric Olander, The Africa Report
Posted on Tuesday, 23 August 2022 11:33

Chinese Foreign Minister Wang Yi addressed a group of African foreign ministers during a virtual FOCAC 8 follow-up session on August 18, 2022.
Chinese Foreign Minister Wang Yi addressed a group of African foreign ministers during a virtual FOCAC 8 follow-up session on August 18, 2022. Image via the Chinese Ministry of Foreign Affairs.

Chinese Foreign Minister Wang Yi unveiled a minor debt relief package for 17 African countries, writing off 23 interest-free loans that came due at the end of the last year.

Wang made the announcement on Thursday at a meeting with a group of African foreign ministers to monitor the progress of commitments made at the Forum on China-Africa Cooperation conference that took place last November in Senegal.

It’s important to note that these grants, or interest-free loans, account for a tiny share of China’s loan portfolio in Africa — in the low single digits — and Wang’s announcement does not have any impact on the much larger commercial and concessional obligations that are due.

Also, this is by no means unprecedented. In fact, China has canceled a number of zero-interest loans to African governments in recent years.

Nonetheless, the move was touted in Chinese state media as exemplary of Beijing’s generosity as a “great power” (大国风范) and that the country acts as a “responsible power” (做负责任的大国).

China to use IMF Special Drawing Rights for Africa

China also announced it would channel $10bn from its share of the recent International Monetary Fund Special Drawing Rights (SDR) mechanism to the continent.

The IMF’s SDR allowed $650bn of cash to be accessed by IMF members, in order to help deal with economic fallout from the Covid-19 pandemic.

Under the quota system, African countries should receive a total of $33 billion of SDRs (out of the $650 billion), a “drop in the bucket”, according to Senegalese President Macky Sall. By comparison, the United States will receive $118 billion (SDR 83 billion).

China, for its part, was allocated $43 billion.

“We are prepared to, through the IMF’s two Trusts, re-channel 10 billion US dollars of its SDR to Africa, and encourage the IMF to direct China’s contributions to Africa”, said Wang.

The SDRs are already part of a wider geopolitical contest of influence on the continent.

At a summit on the financing of African economies, the French president Emmanuel Macron and African leaders called for the reallocation of 100 billion SDRs from the richest countries to African countries. “France is ready for this, as is Portugal,” said Macron. “We now need to convince others to make the same effort, especially the United States.”

Key Highlights From Wang Yi’s Statement at the FOCAC Coordinators Meeting

DIPLOMACY

China called for the African Union to become a G20 member, and Wang reaffirmed his support for Uganda to host a high-level meeting of the Non-Aligned Movement.

TRADE

Wang repeated China’s commitment to further open its market to African imports, particularly agricultural products. He paid particular attention to trade in the “digital economy, health, green and low carbon sectors.”

FOOD

China will provide food aid to 17 African countries to help offset starvation, particularly in the Horn of Africa. Beijing has faced direct criticism from Washington for being “absent” in the global food crisis.

MILITARY

Wang said China “will speed up the delivery of military aid to the AU and regional countries, help Africa enhance the capacity for countering terrorism and maintaining stability.” He did not provide details, though, on whether that aid would be in the form of military support, weapons, or a combination of both.

Published in partnership with The China Global South Project

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