–See CarrZee research below
Unedited from here PDF provided for convenience:
China’s Interest-Free Loans to Africa: Uses and Cancellations
On August 19, 2022, China announced it would waive 23 interest-free loans (IFLs) with maturity by the end of 2021 for 17 unspecified African countries worth an unspecified total amount.
While it is challenging to determine the exact amount of the cancelations due to lack of information, a new policy brief by the Boston University Global Development Policy Center estimates China’s recent IFL forgiveness to Africa could amount to $45 million to $610 million, overall constituting a small portion of China’s lending to Africa.
Using the Chinese Loans to Africa (CLA) Database managed by the Boston University Global Development Policy Center, the policy brief provides four potential estimations for the total canceled value based on timeframes and country criteria assuming at least a ten-year maturity:
- Estimation 1: Assessing IFLs signed in 2000-2012 (maturity date up to 2021) for African recipient countries shows an average loan amount of $8.38 million, making 23 loans worth an average of $192.65 million in loans canceled.
- The smallest possible value of the cancelations is $44.76 million, and the largest possible value of cancelation is $609.57 million.
- Estimation 2: Assessing IFLs signed in 2000-2012 for African country participants of the Group of 20’s (G20) Debt Service Suspension Initiative (DSSI) that also received deferrals from China, show an average loan amount of $10.96 million, making 23 loans worth an average of $251.99 million in loans canceled.
- The smallest possible value is $74.08 million, and the largest possible value of cancellation is $516.69 million.
- Estimation 3: Considering loan cancellation announcements made during the COVID-19 pandemic, IFLs signed in 2010-2012 (maturity dates from 2019-2021) for all African recipient countries show a loan average of $11.47 million. In this case, 23 loans canceled would on average constitute $263.70 million.
- The smallest possible value of the cancellations is $132.09 million, and the largest possible value of cancellation is $402.22 million.
- Estimation 4: Considering loan cancellation announcements made during the COVID-19 pandemic, IFLs signed in 2010-2012 for African recipient countries participating in the DSSI and receiving deferrals from China show a loan average of $12.17 million. In this case, 23 loans canceled would on average constitute $279.97 million.
- The smallest possible value of the cancelations is $249.54 million, and the largest possible value of cancellation is $289.94 million.
- The average amount in each estimation group ranges from $192.65 million to $279.97 million.
- The highest estimation of $609.57 million is only 1 percent of the $53.79 billion in overall loan commitments between 2000-2012.
- If all $2.22 billion worth of IFLs in the CLA Database were cancelled, it would amount to 1 percent of the $159.98 billion of Chinese loans to Africa committed from 2000-2020.
China’s IFL provision and IFL forgiveness in Africa is not new. Including the most recent IFL cancellation, there are now ten instances of China’s IFL debt cancellation announcements for African countries at United Nations high-level meetings and the Forum on China-Africa Cooperation (FOCAC) from 2005-2022. However, IFL provision and cancelation are important diplomatic and symbolic tools in China’s lending practices and are likely to continue to be in the future.