Tuesday , January 19 2021

Chinese loans to sub – Saharan Africa can support growth but pose a risk – Moody 's

Moody 's rating agency said China' s increased lending to sub – Saharan African countries has the potential to support economic growth, but will increase credit risk for high – debt countries.

"Unless the African continent's investments are covered by Chinese lending, unless the sub-Saharan African government creates substantial economic benefits that improve its debt management capabilities, the credit impact of such loans will include increased debt burdens, lower debt burdens, and weak externalities "Moody 's analyst David LOGIC VIC The co – author of the report said.

"China's intention to renegotiate its existing refinance and the conditions for such renegotiation will affect the credit crunch in the region of Sub-Saharan Africa," he said.

China's lending to the region's government has grown from nearly $ 1 billion in 2001 to nearly $ 1 billion between 2012 and 2017, and most loans have focused on infrastructure projects, including power, transportation and communications.

Angola, Congo and Zambia have the most debt to Chinese creditors. In Angola, Zambia, Ghana and Nigeria, interest payments already absorb more than 20% of their income.

Moody's said, "The further increase in Chinese lending – maintaining the current lending rate – should go some way in order to bridge Africa's funding gap."

However, lack of transparency in China's lending conditions and the absence of reform and governance requirements required by multilateral official creditors can limit long-term benefits. "

The FDA said that in some cases where Chinese lenders provided liquidity relief, the amount of resources concessions has increased and export income has decreased in the future.

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