China has approved a proposed G20 debt restructuring framework for debtor countries, the German finance minister has suggested, in a sign that Beijing is prepared to take a concessionary approach to African countries struggling under the burden of debt repayments.
On Sunday, after meeting Chinese vice premier He Lifeng (pictured above), Christian Linder said “we welcome the fact that the Chinese side is also committed to this [debt restructuring] in our Joint Statement, because solutions are inconceivable without China as such an important player in world politics.”
While no specific details have been put forward on what this restructuring may look like in practice, it is expected that China will drop its demand for losses to be shared around other creditor countries and financial institutions. This indicates that China, which is Africa’s biggest bilateral lender and held over $73bn of the continent’s debt in 2020, could be prepared to shoulder significant losses in a bid to help poorer countries overcome debt-related economic issues.
Several African countries – including Nigeria, Ethiopia, and Zambia – have been at risk of defaulting on their debt in recent years. The economic turbulence caused by the Covid-19 pandemic and its aftermath, sharp depreciations in the value of local currencies, and higher interest rates around the world have made it more difficult and expensive for African countries to service their dollar or yuan-denominated external debt.