- Angola, Republic of the Congo and Zambia are among the most indebted to Chinese creditors, according to Moody's.
Angola, Republic of the Congo and Zambia are among the most indebted to Chinese creditors, according to a new report by Moody's.
The report, “Sovereigns – Africa, China's lending supports growth, exacerbates fiscal and external pressures in Sub-Saharan Africa,” examines the level of impact of China debt on African markets.
According to the report released on Wednesday, November 14, 2018, and made available to Business Insider Sub-Saharan Africa, Chinese lending to SSA governments rose nearly tenfold to more than $10 billion a year between 2012 and 2017, from less than $1 billion in 2001.
Moody's says much of the lending has focused on infrastructure projects, including the power, transport, and communication sectors which are expected to support economic growth but with credit risks for countries with already high debt burdens.
Some of the countries feeling the heat include Ghana, Angola, Zambia, and Nigeria where interest payments on those loans already absorb more than 20% of revenue.
“Zambia's external position is particularly fragile, given its very low foreign exchange reserves,” the report states.
David Rogovic, a Moody’s Assistant Vice President-Analyst and co-author of the report, said, “Unless African investment financed by Chinese loans generates substantial economic gains that boost debt servicing capacity of Sub-Saharan African governments, the credit implications of such lending include higher debt burdens, weaker debt affordability and weaker external positions.”
“China's willingness to renegotiate existing loans and the terms of these renegotiations will influence credit trajectories in Sub-Saharan Africa in the coming years.”
Further analysis of the report showed an increase in China's lending - or even maintaining the current pace of lending - should go some way to addressing Africa’s financing gap.
Moody's says lack of transparency over the conditions attached to Chinese lending and a lack of reform and governance requirements, compared with those required by multilateral official creditors, may limit the long-term benefits.