An independent study on Thursday revealed that Chinese lenders approved loans worth $4.61 billion to Africa last year.
The study was carried out by Boston University’s Global Development Policy Centre saying this development marks the first annual increase since 2016.
The centre explained that Africa secured more than $10 billion in loans a year from China between 2012-2018, thanks to President Xi Jinping’s Belt and Road Initiative (BRI), but the lending fell precipitously from the start of the COVID-19 pandemic in 2020.
According to The Centre, last year’s figure, a more than three-fold increase from 2022, shows China is keen to curb risks associated with highly indebted economies,
“Beijing appears to be looking for a more sustainable equilibrium level of lending and experimenting with a (new) strategy,” said the university centre, which runs the Chinese Loans to Africa Database project.
Last year’s biggest items include a nearly $1 billion loan from China Development Bank to Nigeria for the Kaduna-to-Kano Railway and a similar-sized liquidity facility by the lender to Egypt’s central bank.
China has vaulted to the top bilateral lender for many African nations like Ethiopia in recent years.
It has lent the continent a total of $182.28 billion between 2000-2023, the Boston University study found, with the bulk of the finances going to Africa’s energy, transport and ICT sectors.
Africa featured prominently in the initial years of BRI, as China sought to recreate the ancient Silk Road and extend its geopolitical and economic influence through a global infrastructure development push.
China, however, started to turn off the cash spigot in 2019, a shift that was accelerated by the pandemic, leaving a series of incomplete projects around the region, including a modern railway meant to link Kenya with its neighbours.
The reduction in loans was caused by China’s own domestic pressures and growing debt burdens among African economies. Zambia, Ghana and Ethiopia have gone into protracted debt overhauls since 2021.
More than half of the loans committed last year, or $2.59 billion, were regional and national lenders, underscoring Beijing’s new strategy, the study by Boston University found.
“Chinese lenders’ focus on African financial institutions most likely represents a risk mitigation strategy that avoids exposure to African countries’ debt challenges,” it said.
