African nations now send more money to China than they receive in new loans
JOHANNESBURG, Jan 27 (Reuters) – China’s role as a leading financier of developing countries has changed over the past decade, according to an analysis published by ONE Data; Debt repayments continue to rise while new loans to poor countries are falling sharply.
The inaugural report from the ONE Data initiative found that many low- and middle-income countries, particularly in Africa, are now transferring more debt payments to China than they receive in fresh financing from the world’s second-largest economy.
This swing coincided with an increase in net financing from multilateral institutions, which became the main source of development finance when debt service outflows were taken into account.
The analysis found that multilateral lenders increased net financing by 124% over the past decade and now provide 56% of net flows, equivalent to $379 billion between 2020 and 2024.
“The fact that there are fewer loans coming in but the previous loans from China still need to be serviced – that’s the source of the outflows,” said David McNair, managing director at ONE Data.
Africa saw the biggest impact in 2020-24, the latest period for which data is available; In 2015-19, inflows of $30 billion turned into outflows of $22 billion.
The data does not include cuts that take effect in 2025. The closure of the US Agency for International Development last year and the decline in allocations from other developed countries have already affected developing economies, especially in Africa.
McNair said it was likely to see a large drop in Official Development Assistance flows when 2025 data was available.
He said the trend was a “net negative” for African countries as many governments face difficulties in financing public services and investment, but it would also promote domestic accountability as governments become less reliant on external financing.
The report also noted a broader decline in bilateral financial flows and private external debt; Moreover, these trends will be exacerbated by aid cuts from 2025.
(Reporting by Colleen Goko; Editing by Karin Strohecker and Kevin Liffey)
