The German Marshall Fund of the United States

  • Our Organization
    • About GMF
      The German Marshall Fund of the United States (GMF) strengthens transatlantic cooperation on regional, national, and global challenges and opportunities in the spirit of the Marshall Plan.

    Transatlantic Offices

    • Washington, DC
    • Ankara
    • Belgrade
    • Berlin
    • Brussels
    • Bucharest
    • Paris
    • Warsaw
    • Alliance for Securing Democracy
  • Our Work
    • Policy
      GMF provides effective ways forward to solving today’s transatlantic policy issues.
    • Leadership
      GMF programs offer rising leaders dynamic opportunities to hone their leadership skills.
    • Civil Society
      GMF supports civil society by fostering democratic initiatives, rule of law, and regional cooperation.
    • Research
      GMF publications examine the challenges facing the transatlantic region today and offer policy recommendations to address these challenges.
    • Perspectives
      Media, blogs, podcasts, video on the issues shaping the transatlantic relationship.
  • Our Events
    • Major Conferences & Forums
      GMF brings together hundreds of policymakers, elected officials, academics, and business leaders from around the world to discuss topics from energy to migration, economics to security, urban growth to diplomacy.
    • Recent & Upcoming Events
      GMF is committed to bringing the policy community together around transatlantic topics. Learn about events in its offices and other locations around the world.
  • Our Experts
  • Stay Informed
Search
Home
  • Our Experts
  • ABOUT US
  • FOUNDING CHAIRMAN
  • EXPERTS
  • LATEST RESEARCH
  • NEWS&EVENTS
  • PUBLICATIONS
  • SUPPORT CHARHAR

The Charhar Institute

  • About Us

    • About Us
    • Founding Chairman
    • Membership
    • Contact Us
    • Careers
    • Support Charhar
  • Regions

    • All Regions
    • America
    • Europe&Middle East
    • Asia
    • Africa&Latin America
    • Indo-Pacific
  • Topics

    • All Topics
    • Public Diplomacy and International Relations
    • Belt & Road Initiative
    • The Korean Peninsula
    • Economic and Trade
    • Communication
    • Law, Culture and Religion
    • Energy, Safety and Peace
  • Experts

  • Publications

    • All Publications
    • Public Dipmacy Quarterly
    • Other books and reports
    • Charhar Public Diplomacy series
    • Charhar Newsletter
    • Charhar International Relations series
    • Introduction to Public Diplomacy
  • News&Events

    • News&Events
    • Public Diplomacy
    • Peace Studies
    • Belt & Road
    • Charhar News
    • Announcement
    • For Media
Facebook Twitter YouTube Instagram LinkedIn
ForeignAffairs.com
  • ABOUT US
    • About Us
    • Contact Us
    • Careers
  • FOUNDING CHAIRMAN
  • EXPERTS
  • LATEST RESEARCH
  • NEWS&EVENTS
  • PUBLICATIONS
  • SUPPORT CHARHAR

NEWS&EVENTS

Facing challenges, US' IPEF may make the Asia-Pacific economy more...

June 09, 2022

Behind Biden’s Asia Trip

June 09, 2022

US sinks its claws back into Somalia with an eye on China and Russia

May 23, 2022

The Taiwan Question amid Russia-Ukraine Conflict

May 06, 2022

China’s Oil Deal v.s. the Dollar Mar 28, 2022

March 28, 2022

Biden’s Indo-Pacific Foray

February 26, 2022
More

Energy, Safety and Peace

Sudan's 'military-civilian co-governance' dies halfway

November 03, 2021

Human rights standards shall not be monopolized

October 14, 2021

Law, Culture and Religion

Israel's diplomatic breakthrough in Maghreb faces challenges

December 11, 2020

Meng ruling makes Ottawa new front line between Washington and Beijing

May 29, 2020

Communication

He Wenping: Fake news fails in damaging Sino-African ties

January 31, 2019

Resistance from within the White House

September 10, 2018

Economic and Trade

Challenges for the G20 in overcoming the pandemic

November 26, 2020

Liberalization and non-interference by government will clean up Pakistan'...

July 07, 2020

The Korean Peninsula

Su Hao: Tokyo should give ground to resolve tensions with Seoul over ‘comfo...

June 26, 2019

Swaran Singh: Can next U.S.-DPRK meeting be expected?

June 12, 2019

Belt & Road Initiative

China-Africa unity sees friendship of new era

January 05, 2021

Unchangeable Commitment

February 19, 2020

Public Diplomacy and International Relations

The key to peace between Russia and Ukraine CGTN

March 03, 2022

Biden’s first year marked by lows and challenges

March 03, 2022
More

Introduction to Public Diplomacy

Diplomatic Theory and Practice

June 21, 2018

Introduction to Public Diplomacy 2nd Edition

June 20, 2018

Charhar International Relations series

International Public Product: China and the World at the Midst of Revolut...

June 21, 2018

Power and Wealth: Economic Nationalism and International Relationships und...

June 21, 2018

Charhar Newsletter

Charhar Newsletter

August 16, 2018

Charhar Public Diplomacy series

Winning the Chinese Hearts and Souls

June 20, 2018

City Diplomacy: China’s Practice and Foreign Experience

June 20, 2018

Other books and reports

The impotence of conventional arms control

March 25, 2020

How Did Stalin Fall into the “Thucydides Trap”

February 27, 2020

Public Dipmacy Quarterly

Public Diplomacy Quarterly

August 17, 2018
More

He Wenping: Uncovering the truth behind Africa’s debt woes

May 16 ,2019

Western countries continue to use China's Belt and Road Initiative (BRI) as a scapegoat for Africa's debt woes, claiming the initiative is nothing more than a "debt trap." However, debt risk in Africa has been a long-standing problem. The recent debt increases are mainly due to the financial crisis and its ripple effects. Now could be the ideal opportunity for Africa to curb added debt risks.

The ongoing debt issue, especially in sub-Saharan Africa, has been exaggerated. Average public debt in the region was 57 percent of its GDP by the end of 2017. Those who suspect a debt crisis apparently did not place the rich and poor countries on an equal footing since the US had a general government debt to GDP ratio of over 100 percent, while Japan's was over 200 percent in the same year.

The financial crisis of 2008-09 is what caused Africa's debt problems. Poor economic performance accelerated debt accumulation. In 2014, just as the BRI was taking shape, The Economist already discussed a potential debt crisis in Africa that featured a graph showing the debt that was owed to official creditors had been in decline in 2005-06, but started to rise after the financial crisis. 

Another reason for the increased debt is related to oil prices, which took a hit in 2008. African countries have different situations as they either have sufficient or deficient resources and are sensitive to international energy prices. Some African countries such as Angola, Libya, and Nigeria are OPEC members. Meanwhile, over half of all African countries are net importers. 

The decline in oil prices during the latter part of 2008 increased debt and damaged producer economies. The bounced energy prices also hurt African nations short of resources.

Structural debt changes should also be considered. More private lenders driven by profit, rather than official creditors, were attracted to the African countries due to the low interest rates major economies adopted following the financial crisis. 

Official creditors offer concessional loans. The Multilateral Debt Relief Initiative and Heavily Indebted Poor Countries Initiative wrote off qualified debt for African countries. The loans provided by countries like China are usually concessional loans with lower interest rates or extended terms. A total of $15 billion out of $60 billion in support to Africa announced last year by China arrived in the form of aid, along with interest-free and concessional loans. 

Chinese loans are devoted to local infrastructure development. Kenyan President Uhuru Kenyatta rejected the idea that loans from China create so-called "debt traps." During an interview from last year, Kenyatta said Kenya borrowed from China to close the infrastructure gap rather than allow debt for current expenditure accounts to cover salaries and electricity bills.

The "Angola model," also criticized by Western countries, actually worked. China offered cheap credit rates to Angola, which then used its oil as collateral. With this model, Africa's second largest oil producer managed to build infrastructures such as roads and houses. 

BRI projects can safeguard African countries with vulnerable economies from global economic crises and international resource price fluctuations. The China-built Ethiopia-Djibouti railway opened for commercial operations on the first day of 2018, and the largest free trade zones in Djibouti, mainly founded by Chinese companies, began operations in 2017. Djibouti, a country with scarce resources, was able to achieve over 6.5 percent annual GDP growth since 2016 in spite of resource price fluctuations.

As the world economy recovers from the last financial crisis, now might be a good time for African countries to address potential debt risks looming in the background.

African policymakers could make their debt policies more consistent. In countries where the leadership changes, debt policies are often reevaluated. Sierra Leone canceled a $300 million airport project with China because the new government felt it wasn't "economical." 

Another issue with African debt is how loan maturity is too short to cover infrastructure expenses. More long-term bonds need to be issued. 

What it really boils down to is that African nations need to improve their internal financial systems, mobilize resources, and develop better tax collecting methods.



Copy Editor/Kang Sijun

Editor/Kang Sijun



Author: He Wenping is an adjunct senior fellow of the Charhar Institute, researcher of Institute of West-Asian and African Studies, Chinese Academy of Social Sciences.
Source: Global Times, 2019-05-15
Original Link: http://www.globaltimes.cn/content/1149981.shtml

Author

HE Wenping

Adjunct Senior Fellow

Stay Informed

Don't miss our latest dynamic. Sign up to receive emailed news, events, opinion, and publication notifications.

Subscribe

Follow

  • Twitter
  • Facebook
  • Linkedin
  • Youtube
  • SoundCloud
  • Instagram
Charhar Institute
  • About Us
  • Founding Chairman
  • Experts
  • Latest Research
  • News&Events
  • Publications
  • Support Charhar
  • Careers

 

"The Charhar Institute is committed to promoting progress in China’s foreign policies and the development of international relations in a more orderly manner."
- Dr Han Fangming,Charhar Chairman

CONTACT US

  • Phone:+86 10 68290431
  • Fax:010-80777830
  • Email:secretariat@charhar.org.cn
  • Facebook:The Charhar Institute
  • Twitter:@CharharINST

©2022 Charhar Institute. All rights reserved. Privacy Policy and Terms of Use