West, China must ‘urgently’ cooperate to avert Africa’s debt distress

The West and China should seek deeper cooperation over Africa’s debt conundrum in 2023, without which many countries on the continent will face debt distress and defaults, a new research paper by Chatham House warns.

The report warns that although China’s lending to Africa did not cause the current African debt distress in most cases – Chinese lenders account for 12% of Africa’s private and public external debt – it must cooperate with the West, as well as leading African nations, to benefit all parties and support Africa’s investment needs, after a tumultuous year of recession for most economies on the continent. With the overall serious sovereign debt situation in Africa, which looks likely to get even worse in 2023, “attempts to tackle debt distress in Africa urgently need to be separated from the broader geo-strategic competition,” says the report.

The authors also recommend that the G7, led by the incoming Japanese presidency for 2023, develop and build support for a new three-part plan to be eventually embedded at the G20 level on debt relief and future investment in Africa. The plan would include a broad-based dialogue led by, but not limited to, the G7, China and leading African nations on Africa’s medium- to long-term external financing needs; a high-level political understanding between the West and China on the mutual benefit of strengthened cooperation to address African debt distress; and a detailed action agenda, led by the G7 and G20 Finance Tracks, to address obstacles to faster implementation of the G20’s existing Common Framework for Debt Treatments.