Towards the end of the first quarter of 2020, the International Monetary Fund (IMF) and the World Bank called on international lenders to offer immediate debt relief to the world’s poorest countries.
The goal was to provide prompt support to countries in need during the COVID-19 (coronavirus) pandemic.
Most governments were already feeling the cruel hands of the pandemic on their economies and weak healthcare systems, especially in small countries in Africa and Asia. About $40 billion worth of bilateral development aids of which they have received from international creditors were due for repayments in 2020.
But due to the scarcity of dollar caused by oil price crash in January, most of these countries were already reeling under overwhelming pressures of the dollar-dominated debts before the pandemic broke out.
China’s developmental finance to Africa has technically put a debt burden on the continent as it struggles to pay back. Outstanding debt figures reveal China to be the largest creditor to sub-Saharan Africa’s low-income countries. Beijing has single handedly lent $64 billion to Africa, compared to the World Bank’s $62 billion.
However, its weak position in offering a full debt cancellation to the continent is beginning to choke the economies of some governments in the region.
In June the Chinese government offered to cancel its interest-free loans in Africa. Its interest-free loans account for less than 5 percent of Africa’s rapidly mounting debt to China. This move was made 2 months after the World Bank, IMF, and G-20 begun their own emergency financing operations globally, a report shows.
Another report indicates that the Chinese government is not making substantial moves towards debt cancellation as African governments continue to request debt reliefs in the face of an economic-belittling pandemic.
The report also stated that Zambia’s President Edgar Lungu recently sorted the Chinese government for some “debt relief and cancellation” in order to save the economy.
According to Isaac Chipampe, spokesman to the Zambian president, Lung had called for debt relief and cancellation due to declining revenue, a need to tackle the impacts of the coronavirus on the economy and the need to stimulate the economy. However, Beijing has made no commitment to consider the request yet.