African governments’ debt payments double in just two years
Debt problems on the African continent are increasing, with external government debt payments doubling in two years
In new analysis released ahead of the IMF and World Bank Annual Meetings in Bali, Indonesia, Jubilee Debt Campaign show that China accounts for one-fifth of external debt owed by African governments.
Recent news reports have claimed that China is responsible for causing new debt traps on the African continent. The new figures show that China’s role as a lender on the continent has indeed been growing, but its relative importance is less than often stated, especially in regard to countries currently in debt crisis.
The briefing, ‘Africa’s rising debt crisis: Who is the debt owed to?’ shows that debt problems are increasing rapidly for many African countries, with average government external debt payments doubling in two years, from an average of 5.9% of government revenue in 2015 to 11.8% in 2017.
The briefing also shows that of external debt owed by African governments, around 20% is owed to China, 35% is owed to multilateral lenders, 32% to private lenders and 13% to other governments. However, interest rates tend to be higher on private sector loans, which therefore account for 55% of interest payments, compared to China which accounts for 17% of interest payments.
The briefing also investigates who debt is owed to by the countries that currently have the greatest debt problems. Of the 16 African countries rated by the IMF as in debt distress or at high risk of being so, on average 15% of their debt is owed to China. China is therefore on average a less significant lender in debt crisis countries, than across the whole continent.
Tim Jones, Economist at the Jubilee Debt Campaign, said:
“Debt problems are worsening on the African continent, but many lenders bear responsibility, not just China. We need new rules to make all lenders publicly disclose loans to governments at the time they are given. Furthermore, the IMF needs to stop responding to debt crises by giving loans which bailout other lenders, from China to Western companies, incentivising them to continue lending recklessly. Instead, lenders need to be made to restructure and reduce debts.”
The data in the briefing comes from the IMF, World Bank and the China-Africa Research Initiative at John Hopkins University (CARI).
Loans to African governments
The most comprehensive data on loans to African governments from China comes from CARI. CARI says there have been $143 billion of loans from Chinese state institutions, and Chinese private banks, to African governments between 2000 and 2017.
Of the data CARI provides, at least 80% of these loans are from organisations owned by the Chinese state, but up to 20% could be from private companies. These loans increased up to 2013, then fell back, before a spike in 2016.
The CARI data for the 48 countries is that $138 billion was lent between 2000 and 2017, $132 billion of which was between 2006 and 2017.
The Forum on China-Africa Cooperation in September 2018 announced a target of $60 billion of aid investment and loans to Africa, the same amount as at the 2015 summit. Future lending is therefore likely to continue at a similar rate as 2015-2017.
The World Bank does not give data on disbursements by, or debt owed, to China, but it does provide it on those from a broader group of creditors. The World Bank reports on lending by other governments (known as ‘bilateral’ loans), loans by multilateral institutions (and within this loans by the IMF and World Bank) and loans by the private sector from outside the country concerned.
For the 48 African countries on which it has data, the World Bank says $157 billion was lent by other governments to African governments from 2006 to 2017. This is only $25 billion (19%) more than lent by ‘China’ in total.
However, the Chinese figures above could be up to 20% loans from private banks, which would be included elsewhere in the World Bank figures. And signed loans may not all be disbursed at the time they are agreed, whereas the World Bank figure are based on actual disbursements. A final possibility is that not all Chinese government lending to African governments is included in the World Bank figures, because it has not been reported to the World Bank by either borrower or lender.
At most, Chinese government lending accounts for 80% of loans to African governments from other governments between 2006-2017 (and for 2016 reaches 97%). For the reasons stated above it is likely to be significantly less.
Disbursements from other lenders
In total, according to the World Bank, loans to African governments from external lenders amount to $460 billion between 2006 and 2017. This would mean that if China has lent $132 billion over this period, it would account for 29% of total lending. However, this percentage may be overstating Chinese lending for two reasons.
Firstly, the CARI data definition of loan contracts being signed may include loans which have not been disbursed, whereas the World Bank data includes only disbursements. Secondly, the World Bank data may not include all the Chinese loans recorded by CARI, which means total loans from all lenders have been more than $460 billion, so the $132 billion of loans by China according to CARI would be a lower percentage.
According to the World Bank, African governments made $12.8 billion of debt payments to other governments in 2016, in principal and interest, which is 38% of total external debt payments. $13.2 billion was paid to private creditors (40%), and $7.3 billion to multilateral institutions (22%), making total external debt payments of $33.3 billion. Multilateral payments are lower than their relative share of the debt, because interest payments on multilateral debt tends to be lower, and multilateral debt has longer maturities.
The higher cost of private sector loans is seen through debt interest payments. According to the World Bank, in 2016 total external debt interest paid to other governments by African governments was $3.1 billion, compared to $6 billion to private external creditors. $1.8 billion was paid to multilateral institutions, so total external interest paid was $10.9 billion. This means private creditors account for 55% of external interest payments, bilateral 28% and multilateral 17%.
 The CARI data is available for 54 African countries. However, the World Bank, a key source of data on wider creditor groupings, only has data for 48 countries. Therefore, the analysis in this briefing focuses on those 48 countries covered by both CARI and the World Bank.