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Africa should disclose sovereign debt for accurate debt sustainability analysis

Jun 25, 2020
Category: Featured , News

 

By Taurai Chiraerae

Gone is the era when we blamed China for not being transparent in its lending exercise. Times have moved and its country’s prerogative to disclose all its financial endeavors especially in sovereign debt management. Borrowing is not a bad thing as it brings in the much-needed finance for development but has to be done in a sustainable manner. China has financed infrastructure projects like railroads across the continent It has been recorded that about $200 billion of emerging-markets debt owed to China has gone unreported in official statistics in recent years. China does not report on its lending but it becomes crucial when Africa is concerned as comprehensive standardized data on a countries debt stocks and flows are critical to enable policy surveillance and debt sustainability analyses.

Debt sustainability analyses will be hindered if a country’s true debt service burden remains unknown. What remains unique about Chinese lending is the fact that credits are not always government to government but take the form of company-to-company lending. Some of its loans qualify as "official development aid while other Chinese loans are export credits, suppliers' credits, or commercial, not concessional in nature Below is a rundown by Hopkins university of the loans that China has given to African countries by region.

Chinese Loans to African Governments by region, 2000-2017 (MillionsUS$)
 

 

 

 

 

 

 

Source: Lucas Atkins, Deborah Brautigam, Yunnan Chen, and Jyhjong Hwang 2017. "China-Africa Economic Bulletin #1: Challenges of and opportunities from the commodity price slump", CARI Economic Bulletin #1.

Angola is the biggest recipient of Chinese loans in Africa during the period under review followed by Ethiopia and Kenya. With regards to debt sustainability a review done by Sebastian Horn, Carmen Reinhart, and Christoph Trebesch documents china’s overseas lending that demonstrates that China is owed more debt as compared to other creditors in terms of debtor country GDP.

 
Debt owed to China versus debt owed to other official creditors
 

Source: 

As shown above in GDP terms Congo, Zambia, Ethiopia, Angola, Zimbabwe, and Uganda owe more to China than to the IMF, World Bank, and Paris Club governments. Its only Mozambique with more debt to the World Bank in comparison to China. The IMF notes that 20 African countries are in debt distress or at high risk of debt distress. China is not an OECD country and does not report to the OECD’s Creditor Reporting System thereby making debt sustainability analysis for African countries inaccurate if Chinese lending is not put on the overall analysis.

It is therefore paramount that African governments disclose their financial agreements with China as there is no official Chinese Data on loans. Also, Chinese banks also rarely publish information regarding specific financing agreements. The motive for transparency for African countries.

 

 

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