Still, China lends a lot more than the members of the Paris Club combined
THE FOUR-LANE, 62km toll road being built between Masiaka, a business hub in Sierra Leone, and Freetown, the country's capital, promises shorter journey times, fewer accidents and smoother drives. It's nonetheless controversial. Awarded to China Railway Seventh Group, the work added over $160m to the country's foreign debt, according to the China-Africa Research Initiative (CARI) at Johns Hopkins University. The work has suffered delays, that the company blames around the pandemic and also the have to compensate property owners, reports the Concord Times, a local newspaper. The firm has additionally complained that some lorries go by the toll booths, not through them.
Projects like these have mushroomed across Africa along with other developing countries previously Fifteen years. “It's no secret…China is by far the largest bilateral creditor to African governments,” said Mike Pompeo, in June, blaming it for creating an unsustainable debt burden. Plenty else is, however, secret. China doesn't typically divulge how much it has lent to whom or on what terms. Nor is it part of the Paris Club of government lenders, which attempts to co-ordinate debt forgiveness among its members, making sure that no lender uses the magnanimity of another.
Many, therefore, have wondered how China would play its part within the debt-relief initiative agreed in April through the G20 number of big economies. That initiative allows 73 from the world's poorest countries to obstruct payments on loans from G20 governments, creating more resources to fight the pandemic. China, a prominent G20 member, registered. But wouldn't it provide the same terms as the others? Therefore, wouldso would they are fully aware? Proving China does its bit is hard if you don't know how much it's lent.
Recent weeks, however, have yielded a pleasing surprise. To assist monitor the G20 initiative, the World Bank told its board it desired to reveal more data concerning the government debts from the eligible countries. Though its board is covered with its bigger shareholders, including China, the bank's plan faced little resistance. And thus after cross-checking its numbers, the financial institution has now disclosed what eligible governments owe to bondholders, multilateral bodies, private foreign lenders and other governments. The countries taught in data owed $104bn between them to China at the end of 2023. The total includes soft loans from China's government, semi-soft loans from “policy banks”, such as China Development Bank, and profit-seeking loans from state-owned commercial lenders. The same countries owed $106bn around the world Bank and $60bn to bondholders.
The data, say Deborah Brautigam and Yufan Huang of CARI, are a “gold mine”. Prior to the release, they'd to scour public announcements of loan pledges, cross-checked with reports from Chinese embassies or ministry documents in the borrowing country. Along with aiding research, the data also needs to assist the public in developing countries, says David Malpass, the planet Bank's president.
The new figures confirm Mr Pompeo's observation that China is by far the largest bilateral creditor to Africa, and in many poor countries elsewhere (see chart 1). It makes up about about 20% of the total foreign debt owed by the 73 governments entitled to the G20 initiative (contributing to 30% of their debt service this year). That's more than all of the Paris Club lenders, including America, Britain and Japan, combined. But it's also smaller than the estimate well over 25% based on figures from Mr Horn, Ms Reinhart and Mr Trebesch. Indeed their estimates for individual countries often exceed the bank's by large margins (see chart 2).
What explains the gap between Ms Reinhart's research and her new employer's data? Some of it may reflect the difference between announcements and disbursements. Simply because China says it'll lend money, does not necessarily mean the whole sum pays at once (or ever). But even if Mr Horn, Ms Reinhart and Mr Trebesch consider the bank's figures on commitments, rather than incurred debt, they find some loans missing, suggesting incomplete data.
Another reason for the gap might be that the bank excludes some debt owed by state-owned enterprises and special-purpose vehicles but not guaranteed by the government. In other contexts the financial institution does consider scenarios by which state-owned firms fail or public-private partnerships sour, requiring the government to step in. Counting these as public debt brings the bank's estimates closer to the Horn-Reinhart-Trebesch figures.
Such thought experiments could sometimes stretch the definition of public debt, though. The financing raised for Sierra Leone's controversial toll road, for example, should be repaid from toll, not tax, revenues. It would only burden the federal government if those tolls fell short. The World Bank does not seem to count it as being government debt-but it's included by CARI.
The bank's figures for Chinese lending aren't always below outside estimates. For Burkina Faso, the Central African Republic and Liberia they're higher. This, reckons Ms Brautigam, is they include loans from Taiwan. China's critics, including Mr Pompeo, may suspect that it is true lending is higher than the bank suggests. But even they would not need to chalk up to the People's Republic what is properly owed to Taiwan.
From The Economist, published under licence. The original article in English can be found on www.economist.com
