Afrikan Heroes

Claims of Africa’s Debt burden to Chinese overblown

— Oramah

Contrary to the popular opinion in some sections of the international financial community, Africa is not about to walk into another debt trap on account of countries’ stock of Chinese loans. The issue of acclaimed indebtedness by some African countries that took loans from China has been making the rounds in recent times leading many into believing that Africa is making the mistakes it made decades ago with the Paris Club and London Club debts by getting neck deep in debt with China. Bursting the bubble recently, the President of African Export and Import Bank (Afreximbank) Prof. Benedict Oramah acknowledges that “debt levels, generally, have risen, but they are not as bad as they were in the 1990s” and therefore, should cause no one sleepless nights.

Prof Oramah argues that most of the debt owed Chinese lenders and institutions today have gone into infrastructure development, which should help boost economies and enhance growth unlike the earlier, so-called odious loans of yore that went into consumption. Besides, Prof. Oramah , explains, Africa’s debt to GDP is far better than those of many advanced countries’ and seem quite sustainable for now while the level of  debt owed China pales in comparison to Africa’s bond debts.

 Moreover, commodity prices are stable, giving many countries resources to service the loans. He recalled that Africa really got into a mess, the last time because of unforeseen commodity price drop. For a balanced view, Oramah advises analysts to at the overall debt and what the debts went into.

Africa, he further argues, is capital-scarce, but has a huge infrastructure deficit. Unfortunately, “infrastructure is capital intensive, and the continent has no domestic savings to cope and so, must borrow.”

Compelling as his logic is, Prof. Oramah, agrees that leaders must borrow wisely and spend funds on the “right things rather than sheer consumption.