World Bank Seeks “More Transparency” in China’s Loans to African Nations
The president of the World Bank, David Malpass, has said that he is concerned about some of the loans China has been making to developing economies in Africa, calling for “more transparent” terms and conditions.
This comes amid worries that countries including Ghana and Zambia are struggling to repay their debts to Beijing.
However, China says that any such lending is done within international rules.
Developing countries often borrow money from other nations or multilateral bodies to finance sectors that will grow their economies such as infrastructure, education and agriculture.
However, steep increases in interest rates in the US and other major economies over the last year are making loan repayments more expensive because lots of that borrowing is done in foreign currencies such as US dollars or euros.
This, this poses a problem for developing economies who have to find the extra money that is required as the relative value of their own currency falls.
It is a “double whammy and it means that [economic] growth is going to be slower”, says Mr Malpass.
As a result, tackling this challenge and its consequences was one of the main reasons for this week’s visit by US Vice-President Kamala Harris to three African countries, a visit that comes with big commitments of financial support to Tanzania and Ghana, reports say.
There was also a warning that “for governments in Africa, they shouldn’t be offering collateral as an inducement to make a loan, because it locks it up for generations. That’s been happening with China,” the World Bank Chief argued.
Beijing has become one of the biggest sources for loans to developing economies in recent years. A new study led by the Kiel Institute for the World Economy shows that globally, China lent $185bn (£150bn) in bailouts to 22 countries between 2016 and 2021.
However, China refutes suggestions that it is exploiting other countries with its financial support.
At a press conference this week, Foreign Ministry Spokesperson Mao Ning said China “respects the will of relevant countries, has never forced any party to borrow money, has never forced any country to pay, will not attach any political conditions to loan agreements, and does not seek any political self-interest”.
Mr Malpass said the problems were not unique to Chinese financing but things were improving.
“If you think of the history of Western lending, sometimes it’s not for the full benefit of the people in the countries [being lent to]. Even World Bank loans haven’t always been for the best that could have been done in a country.”
“So what we’re trying to do, and I think everyone should be trying to do, is improve the quality of the lending.
“One of the techniques is to unbundle the loan, meaning if there’s an investment project, let’s say you’re building a train, describe the project and what the cost will be. And then separately, arrange the financing.
“If you bundle them together, it makes it very hard to know, am I getting a good deal on the train or on the financing,” he noted.
BBC/Hauwa Abu
Leave a Reply