By Eric Olander
The recent pullback in Chinese lending for African infrastructure development makes sense, given debt sustainability problems in more than a third of the countries across the continent, explained Damilola Akinbami, the Lagos-based head of research at Financial Derivatives Company in an interview on the Nigerian television network Arise News:
Bear in mind that according to an IMF report, at least 20 African countries are either in debt distress or at high risk of falling into debt distress, so obviously any lender would take a step back and ask “what is happening and should I reduce my exposure to this continent?”
So that is what we’re seeing play out and China is going to review its lending structure to Africa and may start targeting small and medium scale projects, and will be more specific in its lending projects, so it’s not going to be general, or large infrastructure projects — [instead we’ll see more] small infrastructure projects.
Akinbami added that African governments’ primary problem is not debt but revenue. Taking on debt to finance development is not a problem, she said, so long as there is sufficient tax collection and other revenues generated to repay the loans.
Akinbami brushed aside concerns about Chinese lending patterns and instead urged viewers to focus on the larger revenue problem in many African countries.
Credit | The ChinaAfrica Project