A recent study by John Hopkins University reveals it may be easier for African Nations to raise debt and also get debt relief from China than private creditors.
The report of the study comes a day after China promised to cancel interests from loans to African nations and restructure debt to Africa. The study also revealed that China has restructured $15 billion of African debt and written off $3.4 billion in the past ten years.
After 1,000 Chinese loans, including restructured Mozambican and Republic of Congo debt, were analysed, the researchers concluded that “the agreements have been easier to reach with Chinese lenders than with private creditors”.
The Paris Club recently agreed to pause debt payment valued at $11 billion for the poorest 73 nations freeing up capital to tackle the coronavirus pandemic. However, not all eligible nations signed up citing fears of default ratings if debt obligations are not met.
The study discovers difficulties in renegotiating terms on International Bonds for African countries due to the disparate ownership structure making private creditors unwilling to grant complete debt relief, citing warnings on rating downgrades.
China accounts for about 20% of Africa’s external debt and lent over $150 billion to the continent between 2000-2018 the study reveals. Chinese President, Xi Jinping has urged global leaders to be more pragmatic with debt suspension for Africa.
The study says much of the terms of Chinese debt to Africa has not been transparent and the relief negotiations may follow the same path.