China writes off more interest-free loans to Africa, but is the move just symbolic?

Beijing says other players such as the World Bank need to shoulder a much fairer share of resolving debt problems on the continent

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Chinese President Xi Jinping speaks at the FOCAC summit in Beijing on Thursday. In his speech, Xi announced interest-free loan write-offs for more than two dozen African countries. Photo: AP

Published: 3:36pm, 10 Sep 2024

China has announced another round of write-offs on interest-free loans to more than two dozen African countries, but observers say the relief addresses only a small fraction of the overall debt burden on those countries.

At the Forum on China-Africa Cooperation (FOCAC) summit in the Chinese capital last week, Beijing said it would waive intergovernmental interest-free loans to 33 African countries due by the end of this year.

Interest-free loan forgiveness is a regular feature of FOCAC. Two years ago, China announced it would forgive 23 loans that had matured in 2021 for 17 African countries.

The loans are extended by the China International Development Cooperation Agency, Beijing’s foreign aid agency. But they account for just a small fraction – about 5 per cent – of the total loans China has provided to African countries, according to observers.

Most of the other loans from China are from its policy banks – including China Exim Bank and China Development Bank – and mostly fund projects under the Belt and Road Initiative, Beijing’s strategy for building global trade and infrastructure links.

On this portion of loans, Chinese banks, including Chinese policy lenders, are more likely to lengthen the repayment period for troubled borrowers, add a new grace period, or refinance the loan, rather than write down the principal amount.