Pacific Exporter's NetworkThis item appeared in the New York Times 2 September 2022.
"China announced that it would cancel the debts of 17 African countries. The move is aimed, in part, at addressing accusations of "debt trap diplomacy" the idea that the superpower has encroached on the continent by lending countries more money than they can pay back.
Beijing hasn't revealed who will benefit from the cancellation, but the news was already being celebrated in Malawi, one of Africa's poorest countries where it has been reported that the cancellation of 5.5 billion kwacha, or $US 5.3 million, has excited Treasury and economic commentators. In Nigeria, pundits estimated that the cancellation would clear nearly 4% of their country's total borrowing.
Chinese leadership has been battling the complex debt trap narrative, pointing to research that Africa owes more to Western lenders. The cancellation also positions China as an "all weather friend" in the words of the foreign ministry as reported by the non profit China Global South Project.
But the loans China planned to cancel are zero-interest loans that amount to just a fraction of its lending to Africa the China Global South Project added. For instance Angola, China's largest debtor in Africa - is unlikely to benefit because the country borrowed from Chinese banks according to an economist based in Luanda, Angola's capital".
We wonder if the Pacific might be on the debt forgiveness plan that China has offered Africa. After the mess that China's debts brought to Sri Lanka, we suggest little benefit will come to highly indebted Pacific countries if China decides to extend its generosity. We think that most of China's lending to Pacific countries is via its State owned banks.
We also note that the Australian Foreign Minister has drawn the attention of Timot Leste to recent moves it has taken to consider Chinese loans.
Our suggestion to all Pacific countries indebted to China is move with care and understand what the long term consequences of borrowing really are.