Expect No Debt Relief, US Warns Africa

The United States has warned African countries that they should not expect western-sponsored debt relief to pay back debts incurred, including debts incurred to China. The statement came from U.S. Assistant Secretary of State for Africa for African Affairs, Tibor Nagy. 

Tibor referenced the Heavily Indebted Poor Countries (HIPC) Initiative begun in 1996 by the World Bank and the International Monetary Fund to help the world’s poorest countries clear billions of dollars worth of unsustainable debt, saying, "We went through, just in the last 20 years, this big debt forgiveness for a lot of African countries. Now all of a sudden are we going to go through another cycle of that? I certainly would not be sympathetic, and I don’t think my administration would be sympathetic to that kind of situation."  Tibor was speaking from reporters in Pretoria, South Africa.

Under the Trump administration, the United States has criticised China for pushing poor countries into debt, mainly through lending for large-scale infrastructure projects. It has warned that those nations risk losing control of strategic assets if they can’t repay the Chinese loans. One such case is that of Sri Lanka which was forced to hand over commercial activities in its main southern port in Hambantota to a Chinese company in 2017 as part of a plan to convert $6 billion of loans that Sri Lanka owes China into equity. U.S. officials warn that a strategic port in Djibouti could be next. Djibouti, however, has denied these claims. 

Chinese interests in Africa include the $126 billion-dollar Belt and Road Initiative, a plan by China to link China to southeast and central Asia, the Middle East, Europe and Africa by sea and land through an infrastructure network with these other areas. According to the China-Africa Research Initiative at John Hopkin's University, China China loaned around $125 billion to the continent from 2000 to 2016. However, China rejects criticism of its lending in Africa. Furthermore, debt campaigners point out that much of Africa’s current debt load consists of commercial debt to western financial institutions or Eurobonds, and these are much more expensive to service than Chinese loans.

All factors considered, Africa is facing another potential debt crisis today, with around 40% of low-income countries in the region now in debt distress or at high risk of it, according to an IMF report released a year ago.

“All of these countries are sovereign states, so it’s for them to decide who they want to trade with,” Tibor added. “We feel we have an obligation to point out to them when we believe they are getting into severe economic difficulties.

Header Image Credit: CGTN Africa