China Debt Relief: The Global Economic Prospects report by World Bank projects the year 2021 as the year of recovery for the global community whose economy was hard hit by the Covid-19 pandemic. With an assumption that majority of the world’s population will have been vaccinated against Covid-19, the global economy is projected to expand by 4%.
According to the report, Sub-Saharan Africa (SSA) is projected to make a rebound growth of 2.7% in 2021. This report comes at a time when the region is looking for sustainable economic policies to restart its growth. As per the 2020 report by the International Monetary Fund (IMF) titled- The Regional Economic Outlook: Sub-Saharan Africa, the largest Covid-19 impact on economic growth in the region was on tourism-dependent economies such as Seychelles and Mauritius.
Besides, manufacturing dependent economies were also highly affected in 2020. Countries such as Nigeria, South Africa and Angola experienced a reduction in their manufacturing sector, leading to a cumulative decline of the Sub-Saharan Africa 2020 economic growth from 2.4% in 2019 to between -2.1% and -5.1% in 2020 as reported by the World Bank biannual Africa’s Pulse report (2020).
The Covid-19 related economic disruption has resulted in an approximately 40% of Sub-Saharan Africa countries being at risk of debt distress that will occasion an economic recession that will take ages to recover. For sub-Saharan African economies, interest repayments constitute the highest expenditure portion — and fastest-growing expenditure —of budgets.
To ease the burden of these countries however, China unilaterally cancelled part of the debt owed by DR Congo to help the Sub-Saharan Africa country focus on its fight against the pandemic. In June 2020, Beijing held an online China-Africa Summit on solidarity against Covid-19 in which the debt situation was discussed, as 40 of the developing countries are in Sub-Saharan Africa.
During his annual African tour in January 2021, China’s foreign minister Wang Yi said Beijing would write off loans to DRC worth an estimated $28 million to help the country overcome the impact of Covid-19 and give $17 million in other financial support.
“Most of the sum pledged would be channelled towards development projects, the rest would be used to support DRC’s mandate as head of the African Union bloc for the next financial year,” Wang said while meeting Congolese president Felix Tshisekedi in Kinshasa.
Wang acknowledged the global outbreak of Covid-19 both as a pressing challenge faced by both China and African countries. “China will continue providing badly-needed medical supplies, expert teams to our African friends and will keep our commitment of striving to make Covid-19 vaccine a public product accessible and affordable to people around the wold,” Wang said.
China is Africa’s biggest investor, pumping about $148 billion in railroads, ports and airports, according to data from the China Africa Research Initiative (CARI) at Johns Hopkins university. China is also the biggest bilateral lender for most emerging economies especially lending to hundreds of projects under its Belt and Road Initiative (BRI).
Wang reiterated that China was using concrete actions to show its special attention to China-Africa ties, noting that China firmly supported the development and rejuvenating of African countries and that the country will always stand with all developing countries.
Most of the sum pledged would be channelled towards development projects.
The year 2021 marks the 20th anniversary of the Forum on China-Africa Cooperation and it is expected that the forum will make a greater contribution to building an even closer China-Africa community with a shared future post Covid-19.
Wang stressed that China’s assistance to Africa was not politically motivated or aimed at interfering in Africa’s internal affairs. “China will support Africa in four aspects, fighting the Covid-19 pandemic, speeding up economic recovery, promoting high-quality China-Africa cooperation and strengthening Africa’s international influence,” Wang noted.
An Africa Union Study on the economic impact of Covid-19 released in April 2020 showed that the continent could lose up to $500 billion and that countries may be forced to borrow heavily to survive after the pandemic.
While the G-20 agreed to suspend debt repayment for the world’s 75 poorest countries until the end of this year, Mr Guterres, Secretary general of the United Nations, maintains that debt suspension should be extended to all developing countries, adding that the private sector must be part of any dialogue on debt forgiveness.
The Economic Cooperation Agreement (ECA) also recommended a “complete temporary debt standstill for two years for all African countries, without exception.”