Africa’s “too little debt” crisis: why finance from China to African countries is more crucial than ever in the wake of COVID-19

Abstract

As COVID-19 has spread across the world, including the African continent, concerns have been raised about the impending debt crisis in Africa, given the fact that levels of debt—including loans from China—have grown in recent years. This paper argues that these concerns are highly subjective and are often based on colonial attitudes about African competence in dealing with domestic challenges. The paper attempts to provide a clearer, impartial understanding of Africa’s history with debt by emphasizing African agency and reviewing three key periods of debt challenges and their implications for today’s debt situation. By doing so, the paper suggests that rather than a crisis of too much debt, African governments are currently facing a crisis of access to cheap finance and need considerably more finance to recover from COVID-19 and meet the Sustainable Development Goals adopted by the United Nations in 2015. The paper also analyzes China’s role in African debt to date and argues that China has been very helpful, especially in the context of the decline in concessional finance for infrastructure from other development partners since the 2000s. The paper further calls for a reimagining of the international debt system in Africa’s favor. The paper concludes by providing clear recommendations for African governments, the international community, and China. The paper suggests that the international community must make adjustments, including systemic changes to how levels of debt and returns are assessed in African countries, for African countries to find innovative, low-risk ways to access finance. Otherwise, a debt crisis of the scale of that of the 1990s may well reemerge. China can help by continuing to provide and even scale up concessional finance for African borrowers, as well as by helping African countries secure favorable changes to the international financing system.