China and Africa: Debt Stress and Debt Relief

The Washington-based Center for Global Development published in March 2018 a study titled "Examining the Debt Implications of the Belt and Road Initiative from a Policy Perspective" by John Hurley, Scott Morris, and Gailyn Portelance. It assesses the likelihood of debt problems in the 68 countries identified as potential borrowers of China's Belt and Road Initiative (BRI). It identifies Djibouti as highly vulnerable to debt distress and Egypt, Ethiopia and Kenya as significantly vulnerable to debt distress. Because it only looks at potential BRI borrowers, it does not assess a number of other African countries that are encountering or may encounter debt distress.

Appendix B of the report notes that 82 percent of Djibouti's external debt is held by China. On the other hand, the percent for Egypt is only 11 percent, for Ethiopia 34 percent, and Kenya 21 percent. Another recent report says that China holds only 14 percent of Kenya's debt. The point is that China's contribution to debt varies hugely from country to country.

Appendix C is a useful account of China's debt relief actions globally (mostly in Africa) since 2000. This is an impressive list of debt cancellation or rescheduling, although most of it occurred between 2000 and 2008.

As of 1 May 2018, the IMF lists 5 lower income African countries in debt distress: Chad, Mozambique, South Sudan, Sudan, and Zimbabwe. It lists another 11 in high risk of debt distress: Burundi, Cameroon, Cape Verde, Central African Republic, Djibouti, Ethiopia, Gambia, Ghana, Mauritania, Sao Tome and Principe, and Zambia. Curiously, the IMF has Kenya at low risk. This listing does not indicate the source of the debt, so we do not know what role China plays.