The president of the World Bank has disclosed that he is concerned about some of the loans China has been giving to Africa’s developing economies.
According to the president, David Malpass, the terms and conditions should to be “more transparent”.
The concern comes amid worries that nations including Ghana and Zambia are struggling to repay their debts to Beijing.
China says that any such lending is done within international rules.
Often, developing nations borrow money from other nations or multilateral bodies to finance sectors that will grow their economies such as infrastructure, education and agriculture.
Despite this, steep jumps in interest rates in the US and other major economies over the past year are making loan repayments more expensive as majority of that borrowing is done in foreign currencies such as US dollars or euros.
This is an acute problem for developing economies which struggle to find the extra money that is required amid a decreasing value of their own currencies.
It is a “double whammy and it means that [economic] growth is going to be slower”, Malpass says.
Tackling the challenge and its consequences was one of the major reasons for last week’s visit by US Vice-President Kamala Harris to three African countries.
It is a major visit that comes with big financial support commitments to Tanzania and Ghana.
So far, there is a growing rivalry with China for influence in the continent, whose abundance of natural resources include the metals, including nickel which is crucial for the batteries needed for technology such as electric cars.
Speaking in Ghana’s capital, Accra, she said “America will be guided not by what we can do for our African partners, but what we can do with our African partners”.
While giving details about a new nickel processing facility in Tanzania, Harris said the project would be supplying the US and other markets by 2026 and that it would “help address the climate crisis, build resilient global supply chains, and create new industries and jobs”.
Malpass hailed the collaborative approach saying the competition between earth’s two biggest economies was “maybe healthy for developing countries” as it provided options.
“What I encourage strongly is that they be transparent in their contracts. That’s been one of the problems; if you write a contract and say ‘but don’t show it to anybody else’, that’s a minus. So get away from that.”
There was also a major caution that “for governments in Africa, they shouldn’t be offering collateral as an inducement to make a loan, because it locks it up for generations. That’s been happening with China.”
In recent years, China has become one of the greatest sources of loans to developing economies. A new study led by the Kiel Institute for the World Economy shows that globally China lent $185bn (£150bn) in bailouts to 22 countries between 2016 and 2021.
China has declined suggestions that it is exploiting other countries with its financial support.
At a press conference last week Foreign Ministry Spokesperson Mao Ning said China “respects the will of relevant countries, has never forced any party to borrow money, has never forced any country to pay, will not attach any political conditions to loan agreements, and does not seek any political self-interest“.